Alarm spread after the dramatic breakdown of bailout talks between Athens and its creditors over the weekend and a decision Sunday by the European Central Bank not to increase its financial support to the Greek banks. A banking source in Greece said only 40 percent of cash machines now had money in them and a host of European governments advised citizens traveling to Greece to carry money with them. The two sides have been at odds over the economic reforms demanded by the creditors in exchange for fresh cash needed to keep the Greek state afloat. These fears could soon include popular American firms such as Accenture plc (ACN), Xerox Corporation (XRX), and The 3M Company (MMM) that have a presence in Greece. With the approval of the reforms and the deal staying put, the immediate risk of Greece running out of money has been removed. The Greek government says tourists staying in Greece and anyone with a credit card issued in a foreign country will not be affected by the measures to limit bank withdrawals newly imposed by the government. People making cash withdrawals at an ATM machine in Monastiraki in Athens, early Monday, June 29, 2015. Finance ministers discussed the request by phone and agreed to hold another call Wednesday, when Greece is expected to provide more details. Jeroen Dijsselbloem, who chaired the meeting, said any new rescue may require tougher conditions than those Greece has already rejected because of the rapid deterioration in the country’s finances.
That’s because Greek Prime Minister Alexis Tsipras is still urging Greeks to vote against the most recent bailout offer from Europe and the IMF in a referendum on Sunday.
Greek banks remained shut Tuesday and limits on cash withdrawals were in place as the country tried to stave off financial collapse before the vote.
No one Greeced their palms, the same thing is headed for the US cause you can’t borrow your way out of debt! With last week's outflows from Greek banks totaling €6 billion by some estimates, and with Reuters reporting pre-orders for Monday withdrawals topped €1 billion, capital controls now appear to be almost inevitable and indeed, the ECB itself hinted earlier today that if Monday's emergency summit is a failure (which now appears likely), it will need to reevaluate whether the ELA cap is increased starting tomorrow.
Now, FT reports that Greek banks, having lost another €400 million over the weekend, are imposing unofficial capital controls. The ECB on Monday raised the limit on the amount of emergency loans available to Greek banks by around €2bn, according to two central banking officials. The ECB had already increased so-called Emergency Liquidity Assistance on Friday, but withdrawls from Greek banks have continued apace. A commercial banker said about €400m had been withdrawn via ATMs over the weekend, bringing total outflows to €2bn between Friday and Sunday, a number confirmed by a central bank official. Greek banks have imposed an unofficial ceiling of €3,000 on walk-in withdrawals, the commercial banker added. This comes as ELA collateral runs dangerously short and indeed, the above could indicate Greek banks now realize that even in the event the ECB agrees to raise the ELA ceiling tomorrow and Wednesday, the banking sector may run out of pledgeable assets. In most cases, the average Greek citizen worked for those fiat notes, depositing them in good faith with their local crooks (banks). I don't think ordinary Greeks are standing in long lines at banks because they are afraid they can't get € for everyday expenses. If I were a Greek, and had any sizable amount of fiat on a bank there, I would be doing everything I could to get my € out of the hands of these crooks. Technically, according to the treaties, only ECB can institute capital controls, so officially for Greece means breaking the treaties. Same thing at my bank, just getting $1,000 in cash brings out the bank president like you're a criminal.
Accounts held at ING Bank by Russia's embassy to Belgium as well as the country's representative offices to the European Union and NATO are among those to be unfrozen first, said the spokesman Henrik Van de Velde.
Most Australian Banks have similar withdrawal limits (unless you give the branch notice) even without a crisis. But it would put Greece on the slippery slope towards Grexit,” wrote Holger Schmieding, chief economist of Berenberg Bank. This rate of deposit flight could lead Greek banks to run out of money in less than two months. ELA refers to loans that are needed to keep the bank running when they have a funding shortfall. Many cash machines were dry on Sunday in Greece after customers queued up in front of the machines for hours to withdraw their money.The radical capital control measures were imposed to protect the banking system from the threat of mass panic at the prospect of a possible default by Greece and the impact of the referendum announcement on negotiations with creditors.
Thousands of people rallied in Athens in support of a bailout deal with international creditors which has been rejected by Prime Minister Alexis Tsipras, leaving Greece on the brink of default. And without a huge shift in the Greek government’s position, a new round of talks may prove just as fruitless as the last. Advance orders for withdrawls worth at least €1bn placed on Friday will leave Greek bank accounts today.
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