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Greece: A week with no banks

Jannis Papadimitriou, Athens / ksbJune 29, 2015

Greece is on the edge of the economic abyss. As capital controls are rolled out the country's banks will remain closed for at least a week. DW's Jannis Papadimitriou reports from Athens.

Queue in front of a Greek bank
Image: Reuters/A. Avramidis

Although the finer details remain unknown, money transfers are currently restricted to European countries, and even domestically, companies are only allowed to withdraw larger amounts of cash with prior approval. According to a number of concurring Greek media reports, however, Greek ATMs will reopen from Tuesday, but with withdrawals capped to a daily limit of 60 euros ($66). On the same day, Greece's current bailout package is due to expire, with fresh billions for a rescue nowhere in sight.

Last month alone, Greeks withdrew more than 3.5 million euros from their bank accounts. Throughout June, the trend has relentlessly continued.

"In the end, capital restrictions were unavoidable," said Michael Glezakos, professor of fiscal policy at the University of Piraeus, in an interview with the Greek television channel Skai.

Economists have warned that, if banks remained open, deposits would soon be gone. Meanwhile, the European Central Bank (ECB) has decided to no longer extend emergency credit for Greek banks via Emergency Liquidity Assistance (ELA).

The pot of 90 billion euros previously granted to Greece is almost empty. But, the fact that Frankfurt central bankers are still standing by ELA support for Greek financial institutions is something Professor Glezakos sees as a positive sign.

"The announcement of a referendum on the reform policy in Greece could by understood by ECB chief Mario Draghi as the end of the current rescue program and then he would be entitled to just pull the plug on Greek banks," says the economist.

Greek ATM
From Tuesday, Greek ATMs will no longer dispense cashImage: Reuters/Y. Behrakis

Threatening scenario ahead of referendum

After the bank closure, there was initially no panic in Hellas. But still more and more people flocked to the ATMs in the hope of withdrawing large sums of before the introduction of capital controls. In the early hours of Monday morning (29.06.15), there were even long queues in front of gas stations. In a bid to prevent disputes or theft, Greek police have stepped up patrols, with some officers even being brought back from holiday.

Athens' left-wing politicians are now blaming the EU's leading players and various media outlets, both home and abroad, for creating a panic campaign which aims to intimidate the Greeks.

"Who lured all these people to the gas stations?" asked left-wing MP Jorgos Varemenos in a TV interview. He answered the question himself: "This is a shock-and-awe-operation to force the Greek people to their knees."

A conspiracy against the new Greek government? For conservative opposition leader and former Economy Minister, Kostis Hatzidakis, the truth is very different: "We have a government which presents the prospect of cuts amounting to 8 billion euros, while there was still talk during the election campaign of multibillion-dollar bounties," Hatzidakis told Greek TV station Skai.

Currency conversion 'not an issue'

The closure of banks in Greece now begs the question more than ever, whether a vote will be cast on Sunday over the creditors' newest reform proposals or a Greek exit from the euro. The nearer the referendum comes, the stronger the polarization and the more the "us-against-them feeling" grows.

Already on Sunday, sympathizers of Greece's leftist party were demonstrating in front of parliament, as well as the EU office in Greece. On Monday, the protest movement was due to meet again in Athens' city center to demonstrate "against the creditors' ultimatum." A day later, the opposition movement will march in support of the EU.

For Nikos Filis, spokesperson for Greece's governing left party, a return to the drachma isn't on the cards.

"Apart from Mr Schäuble, I don't see anyone at the minute that's suggesting an exit from the euro," Filis said in a TV interview.

Political journalist Jannis Pretenderis sees things quite differently, however.

"No one seriously believes that we'll vote on Sunday whether the tax amounts to 13 percent or more. In principle, we'll decide in a referendum, which currency our banks will reopen with," the analyst told TV broadcaster, Mega.