Long line-ups formed at cash machines as Greeks suspected that the banks would not reopen Tuesday and that the withdrawal limits would be reduced to the point families would have trouble paying for their basic needs.
Achilleas Kasimidis, 29, a salesman at a technology startup, said he was under no illusion that the banks would fully reopen any time this week. “The Greek banking system cannot return to its normal capabilities without a new deal,” he said. “It currently lies at the brink of collapse.”
When the government of prime minister Alexis Tsipras announced on June 28 that the banks would shut their doors, and that a €60 a day withdrawal limit would be imposed, it said the banks would reopen on July 7. But it appears that promise was made on the assumption that the European Central Bank would boost the emergency liquidity assistance (ELA) to the banks. It has not, putting the banks dangerously close to running out cash.
On Monday, the day after the resounding No vote in the Greek referendum signalling the rejection of the creditors’ last bailout offer, the ECB was to decide whether to boost the ELA program to the Greek banks, reduce it or leave it intact at the current level. The betting was that ELA would remain as it is, at €89-billion. But since most of that amount has already been soaked up by the banks to cover the steady loss of deposits, merely leaving the cap unchanged would put enormous pressure on the banks.
“The liquidity crunch can only be alleviated in the immediate term by the ECB via an increase in ELA to Greek banks,” Manulife chief economist Megan Greene said in a Monday note written from Athens. “In the absence of a deal – or at least concrete progress towards a deal – it is unlikely the ECB will increase it’s own exposure to Greece. By raising ELA, the ECB would effectively be financing a bank run.”
A senior banking official, who did not want to be identified, said Monday that the banks still had access to about €1.5-billion of liquidity. Of that amount, there was only about €500-million left in ELA. The rest – €1-billion – was in bank vaults and at the banks’ current accounts at the Bank of Greece. He said the banks were losing about €150-million a day, mostly through the ATM withdrawals and limited pension payments, implying they have ten days before they are bled dry and collapse.
If the withdrawal limits are reduced to, say, €40 or €30 a day, the banks might be able to survive a few days longer.
If the banks collapse, Greece almost certainly would be forced out of the euro zone and reprint the drachma. Many economists put the chances of a Greek exit – Grexit – at 50 per cent or higher. JP Morgan puts it at two-thirds, it said on Sunday night, when the No vote prevailed.
On a Monday BBC interview from Athens, Greece’s economy minister, Giorgos Stathakis, made a plea to the ECB for more ELA to keep the banks alive for another ten days or so to allow new bailout talks to take place between the Greek government and its creditors. If the ELA ceiling is not lifted, “I think liquidity is secure for a number of days,” he said.
The Greek government was scrambling on Monday to come up with a plan to pitch new bailout terms that would keep its banks solvent and the country inside the euro zone.
In the morning, the Greek finance minister who had accused the country’s creditors of “terrorism” ahead of Sunday’s national referendum resigned.
Yanis Varoufakis’s departure, which was announced in his blog, was seen as a sort of peace offering to the creditors – the ECB, the European Union and the International Monetary Fund. His combative style had won him no friends during the negotiations.
Mr. Varoufakis said “Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.”
The next few days, while the banks are still alive, will no doubt make or break Greece’s chances of forging a deal with the creditors. In the afternoon, Mr. Tsipras was busy forming a new negotiating team. On Monday night, German chancellor Angela Merkel and French president Francois Hollande are to meet in Paris to discus the Greek situation. On Tuesday, the euro zone finance ministers are to meet to discuss any new proposal from Greece. That evening, the euro zone leaders will do the same at a special summit in Brussels.
Ms. Merkel, through her spokesman Steffen Seibert, made it clear on Monday that any new proposal would have to come from Greece, not the creditors.
“Greece is a member of the euro,” he said. “It is up to Greece and its government to act so that this can remain the case. It depends now on what proposals the Greek government puts on the table.”
