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Bank of Greece: Keep banks closed, limit transactions

Greek Prime Minister Alexis Tsipras says the Bank of Greece has recommended that banks remain closed and restrictions be imposed on transactions, after the European Central Bank didn’t increase the amount of emergency liquidity the lenders can access from the central bank.

Sunday’s move comes after two days of long lines forming at ATMs across the country, following Tsipras’ decision to call a referendum on creditor proposals for Greek reforms in return for vital bailout funds.

Tsipras gave no details of how long banks will remain closed or what restrictions will be placed on transactions. Banking officials said lenders would remain shut for at least a day, with some media reporting the institutions would remain closed for at least a week.

Tsipras called a Cabinet meeting Sunday night, after a dramatic day that saw Greeks flocking to ATM machines to withdraw what money they could, fearing limits would be placed on banking transactions imminently.

The move comes after Tsipras called for a referendum on creditor proposals for Greek reforms in return for bailout cash – a decision which shocked Greece’s European partners.

The country’s negotiations with its European creditors have been suspended, with both sides accusing each other of being responsible.

The European Central Bank has left unchanged the amount of emergency liquidity available to Greek banks, putting further pressure on the system and heightening the chances of capital controls being imposed.

The European Commission says it has released the text of its proposals on Greek reforms, which are the documents Tsipras has asked his countrymen to vote on in a referendum.

The Greek government is advocating a no vote in next Sunday’s referendum, saying the proposals were humiliating for Greece and would have pushed the country’s already devastated economy further into recession.

But the proposals Greeks are being called on to vote for haven’t been officially released until now or translated into Greek.

The commission said it was releasing the text of the proposals “in the interests of transparency and for the information of the Greek people.”

It said discussions had been ongoing with Greek authorities on Friday night on the proposals, and that any agreement would have “addressed future financing needs and the sustainability of the Greek debt.”

It has been a longstanding demand of Tsipras’ government that creditors offer some sort of debt write down or forgiveness, arguing the country’s debt is too big to be repaid.

However, the commission said, neither the latest version of the document nor a deal could be finalized because of “the unilateral decision of the Greek authorities to abandon the process on the evening of 26 June.”

International Monetary Fund head Christine Lagarde says she has briefed the IMF board on the “inconclusive outcome of recent discussions on Greece” and says the next few days will be important.

She says she shared her “disappointment and underscored our commitment to continue to engage with the Greek authorities.” Lagarde says she welcomed promises by the eurozone’s finance ministers and the European Central Bank “to make full use of all available instruments to preserve the integrity and stability of the euro area.”

The IMF chief said she backed a balanced approach “to help restore economic stability and growth in Greece, with appropriate structural and fiscal reforms supported by appropriate financing and debt sustainability measures.”

A spokesman for Greece says it was the creditors who ended bailout negotiations by presenting an ultimatum.

Government spokesman Gabriel Sakellaridis predicts that ultimatum will be rejected in next Sunday’s referendum – and says that will allow talks on Greece’s financial future to resume on a sounder basis.

“The Greek people’s proud ‘No’ will mark the continuation of negotiations to achieve a real and substantial solution and not an agreement that will recycle the problems,” he says. The newspaper I Efimerida ton Syntakton published his comments Sunday.

Sakellaridis said the government will respect the result of the referendum but did not say whether it would apply the creditors’ measures or resign if the Greek people voted to accept the proposals.

The Greek vote next Sunday on approving creditors’ demands for Greece will be the country’s first referendum in 41 years – and the logistics of it are daunting.

The referendum that Parliament approved early Sunday sees citizens voting July 5 on two creditor proposals – one of which is a very technical debt sustainability analysis. These have not even been translated yet into Greek.

Others argue the vote won’t be on documents, it will be a vote on whether or not Greece stays in the euro.

Ballot officials for each voting precinct must be called up, but these must be headed by lawyers, who often have to travel to remote places.

The last Greek referendum was when voters abolished the monarchy in 1974.

Greece’s finance minister is suggesting that his country might not pay the 1.6 billion euros ($1.8 billion) it owes to the International Monetary Fund on Tuesday.

Greek Finance Minister Yanis Varoufakis refused to reply to a direct question Sunday on the payment. Instead, he told BBC radio that the European Central Bank should pay the money to the IMF out of the profits it made on Greek bonds in 2014. Varoufakis calls that idea “a very sensible transfer.”

Asked directly, for the second time, whether Greece will pay up Tuesday, Varoufakis replies: “We are owed money by one part of the troika and we owe money to another part of the troika? Why don’t they sort themselves out and transfer money from one pocket … to the other?”

The European Central Bank has announced it is maintaining emergency credit to Greek banks at its current level.

The decision keeps a key financial lifeline open but does not provide further credit to Greece’s banks, which are seeing deposits drain away as anxious Greeks withdraw savings.

The ECB said it was working closely with the Bank of Greece to maintain financial stability and added it could reconsider the decision on credit levels.

ECB head Mario Draghi said “we continue to work closely with the Bank of Greece and we strongly endorse the commitment of Member States in pledging to take action to address the fragilities of euro-area economies.”

Thanassis Stavrakis and Paris Ayiomamitis in Athens, Greece, and Derek Gatopoulos and Lorne Cook in Brussels contributed to this report.

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