Running out of cash, Greece counts on ECB to avert Black Monday
Greek bank executives and European officials are warning of an imminent cash crunch or bank shutdown after talks on a new aid package collapsed.
European Central Bank policy makers are set to discuss Sunday whether to pull the plug on emergency loans that have kept the nation’s financial system afloat as withdrawals mount at a record pace. The country owes $1.7 billion to the International Monetary Fund in two days.
“Monday could be a bank holiday” in Greece, Irish Finance Minister Michael Noonan said late Saturday. “It’s not a question of waiting to see what might happen on Monday in terms of crisis. The crisis has commenced.”
Greek Prime Minister Alexis Tsipras upended five years of crisis-fighting at about midnight Friday, rejecting the creditors’ conditions for aid and instead calling a July 5 referendum on the proposals. Meeting in Brussels the next day, euro-area finance chiefs rejected his request to extend Greece’s aid program beyond June 30, and instead started making preparations to contain the fallout.
The deposit flight that has depleted the country’s coffers since late 2014 accelerated after the latest twist in the financial crisis that began in late 2009.
Aid Needed
Two senior Greek bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece.
An official with Greece’s Capital Markets Commission, the markets’ regulator, also warned that the Athens Stock Exchange may be unable to operate on Monday without a cash injection into the banking system. A Greek central bank spokesman said it was making efforts to supply money.
Some banks placed limits in daily cash transactions. Yiota Kardogianni, a manager at a branch of Piraeus Bank SA, said cash withdrawals were limited to 3,000 euros ($3,350) daily and ATM withdrawals at 600 euros. Alpha Bank AE had set a daily limit of 5,000 euros for most of its branches since last week.
The ECB has been reviewing liquidity conditions at Greek banks on a near-daily basis in the past week. Banking officials in Athens said they were expecting a shortage of euro notes by as early as Saturday evening. They asked not to be named because of the sensitivity of the matter.
Deposit Flight
Greek bank deposits shrank by 30 billion euros between January and May this year to 129.9 billion euros, according to data released by Bank of Greece on its website on Thursday.
The ECB’s power over Greece lies in the emergency aid it has fed to keep the nation’s banks alive through five months of failed political talks on unlocking bailout funds. Should it halt that, Greece may have to consider capital controls or a bank holiday to protect its economy. Analysts have said such a move could potentially put the country on a path to exiting the single currency.
“The ECB had continued supporting the Greek banking system over the past few months of deposit flight because of the hope that an agreement would be reached, and the assumption that the Greek government will not default on payments,” said Christian Keller and Ajay Rajadhyaksha, analysts at Barclays Plc. “It is unclear if the first argument still holds, and the second clearly doesn’t.”
[Bloomberg]
