ATHENS, Greece—Anxious Greek pensioners swarmed closed bank branches and long lines snaked outside ATMs as Greeks endured the first day of serious controls on their daily economic lives ahead of a July 5 referendum that could determine whether the country has to ditch the euro currency and return to the drachma.
As strict capital controls took root Monday following Prime Minister Alexis Tsipras’ surprise weekend decision to call a referendum on international creditors’ latest economic proposals, Greece’s population tried to fathom the sheer scale of the changes on their daily lives.
Following a breakdown in talks between Greece and its creditors, the country is in the midst of the one of the most acute financial crises seen anywhere in the world in years. It’s running out of time to get the money it needs to stave off bankruptcy.
Those fears stoked fears of a crippling bank run, a messy Greek debt default and an exit from the euro. As a result, the country’s government imposed strict capital controls, none more onerous than a daily allowance of a measly 60 euros ($67) at the ATM.
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The controls come ahead of a big 1.6 billion-euro payment Greece has to make to the International Monetary Fund.
It’s unlikely to be able to pay that without financial assistance.
But Greece’s bailout program with its European creditors officially expires Tuesday too, meaning the country will not have access to any of the money still available if it doesn’t secure a deal.
For months, the left-wing led Greek government, elected in January on a promise to bring an end to the hated austerity that it blames for an acute economic recession, has failed to agree a package of spending cuts and reforms demanded by creditors in exchange for the remaining 7.2 billion euros ($8.1 billion) of rescue loans.
The sight of an economy on the precipice hit global markets hard Monday. In Europe, the Stoxx 50 index of leading shares ended 2.5 percent lower while Germany’s DAX slid 3.6 percent. There were also some early warning signs that Greece’s problems may prove contagious — the borrowing rates of other highly indebted eurozone countries such as Italy and Portugal inched up slightly.
Investors are worried that should Greece leave the euro and say it can’t pay its debts, which stand at more than 300 billion euros, it will be forced into a chaotic return to the drachma — developments that could derail a fragile global economic recovery as well as raise questions over the long-term viability of the euro currency itself.
“The major market concern is that if Greece were to default and or exit then it might encourage others to do the same,” said Gary Jenkins, chief credit strategist at LNG Capital. “Thus it puts the entire eurozone project at risk of collapse.”
Tsipras is advocating Greeks reject the proposals in the popular vote, which increasingly has the look of a vote on euro membership itself.
That message was hammered home by European leaders.
“I‘d like to ask the Greek people to vote ’Yes’ ... I very much like the Greeks, and I‘d say to them ’You should not commit suicide because you are afraid of death,” European Commission President Jean-Claude Juncker, in an emotional speech given against a backdrop of giant Greek and EU flags.
Negotiations with Greece with not dead, German Chancellor Angela Merkel and her deputy insisted — as long as Greeks supported that path in Sunday’s vote.
“It must be crystal clear what is being decided: It is essentially the question, yes or not to remaining in the eurozone,” Vice Chancellor Sigmar Gabriel said.
In Greece, the sense of unease was evident in the number of pensioners lining up at bank branches hoping they might open. Many elderly Greeks don’t have bank cards and make withdrawals in person at the till, and so find themselves completely cut off from their money.
“I came here at 4 a.m. because I have to get my pension,” said 74-year-old Anastasios Gevelidis, one of about 100 retirees waiting outside the main branch of National Bank of Greece in the country’s second largest city of Thessaloniki.
“I don’t have a card, I don’t know what’s going on, we don’t even have enough money to buy bread,” he said. “Nobody knows anything. A bank employee came out at 8 a.m. and told us ‘you’re not going to get any money,’ but we’re hearing that 70 branches will open.”
Aside from developments at the banks in Greece, massive queues formed at gas stations, with worried motorists seeking to fill up their tanks and pay with credit cards while they were still being accepted.
Although credit and cash card transactions have not been restricted, many retailers were not accepting card transactions Monday.
Electronic transfers and bill payments are allowed, but only within Greece. The government also stressed the controls would not affect foreign tourists, who would have no limits on cash withdrawals with foreign bank cards.
For emergency needs, such as importing medicines or sending remittances abroad, the Greek Treasury was creating a Banking Transactions Approval Committee to examine requests on a case-by-case basis.
Tsipras announced the capital controls in a televised address Sunday, blaming eurozone finance ministers for their rejection of an extension request to the bailout program.
The referendum decision, which has been ratified by Parliament, shocked and angered Greece’s European partners.
Greece is dividing into two camps ahead of the referendum — with most of the opposition backing a “Yes” vote.
“If you want to stay in the euro, vote yes ... If you want banks to open, vote, yes ... and most important, if you want to stay in Europe, vote yes,” former prime minister, Antonis Samaras, told lawmakers from his conservative party.
Protesters gathered late Monday to back the government proposal. A rally in support of the “Yes” vote in planned Tuesday.
