Elderly people, who usually get their pensions at the end of the month, wait outside a closed bank in Athens
Greece shut its banks and imposed capital controls in an announcement designed to avert the collapse of its financial system, heightening the risk it will be forced out of the euro. European stocks and Greek bonds tumbled.
The measures, which were announced in the dead of night, limit daily cash withdrawals to 60 euros (USD66) and ban payments and transfers abroad. The stock market and banks will be closed at least until July 6, the day after Greeks will vote in a referendum on proposals needed to restore bailout aid.
“If you were to put a gun to my head and say ‘give me a probability right now that Greece is in the euro zone in the next few weeks,’ I would tell you it’s 15 percent,” Mohamed El- Erian, chief economic adviser at Allianz SE, said in a Bloomberg TV interview. “There’s an 85 percent probability it will be forced to leave the euro zone, not because it wants to do so but because it simply is no longer able to stay.”
Prime Minister Alexis Tsipras, who promised to return “dignity” to the people and reject additional budget cuts imposed by creditors, appealed for “calm” after weekend-long queues at ATMs and gas stations. The Euro Stoxx 50 Index fell 4.5 percent and Greek 10-year notes plunge by the most since at least 1998, driving the yield to 14.6 percent, the highest since December 2012. German bunds rallied the most since 2011, sending the 10-year yield to 0.77 percent.
The bank controls followed a weekend of turmoil that started with Tsipras’s shock announcement late Friday of a July 5 referendum on austerity measures demanded by the country’s creditors. People rushed to line up at ATMs and gas stations after the breakdown of aid talks late Friday and a European Central Bank decision to freeze its lifeline to Greek banks. Greece is the second euro-area country, after Cyprus in 2013, to impose capital controls.
“In the coming days, what’s needed is patience and composure,” Tsipras said on television. “The bank deposits of the Greek people are fully secure. The same applies to the payment of wages and pensions – they are also guaranteed.” Christos Ziotis, Paul Tugwell and Nikos Chrysoloras, Bloomberg
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