24 October 2016
People line up to withdraw cash from an ATM in Athens Sunday. Photo: Reuters
People line up to withdraw cash from an ATM in Athens Sunday. Photo: Reuters

Greece closes banks, imposes capital controls

Greece has closed its banks and imposed capital controls, Reuters reported.

After bailout talks between the leftwing government and foreign lenders broke down at the weekend, the European Central Bank froze vital funding support to Greece’s banks.

Athens was left with little choice but to shut down the country’s financial system Sunday to keep the banks from collapsing.

Banks are expected to be closed all this week, and there will be a daily 60 euro (US$65.85) limit on cash withdrawals from cash machines, which will reopen Tuesday.

Capital controls are likely to last for many months.

“The more calmly we deal with difficulties, the sooner we can overcome them and the milder their consequences will be,” a somber-looking Prime Minister Alexis Tsipras said in a televised address.

He promised bank deposits would be safe and salaries paid.

Even as Tsipras spoke, the lines forming at petrol stations and in front of the shrinking number of bank machines that still contained cash highlighted the scale of the disaster facing Greeks, who have endured more than six years of economic decline.

The failure to reach a deal with creditors leaves Greece set to default on 1.6 billion euros of loans from the International Monetary Fund that fall due Tuesday.

Athens must repay billions of euros to the European Central Bank in the coming months.

The impending default on the IMF loans leaves Greece sliding towards an exit from the eurozone, with unforeseeable consequences for Europe’s grand project to bind its nations into an unbreakable union by means of a common currency.

It also carries broad implications for the global financial system.

After months of wrangling, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras’ shoulders.

The 40-year-old premier caught them by surprise in the early hours of Saturday by rejecting the demands of lenders and calling a bailout referendum.

The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

After announcing the referendum, Tsipras asked for an extension of Greece’s existing bailout until after the July 5 vote. Eurozone officials refused.

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