ECB to rescue as Greeks withdraw €1bn in a day

Greek prime minister Alexis Tsipras, right, meets Russia's Vladimir Putin yesterday to discuss the crisis. Picture: AP
Greek prime minister Alexis Tsipras, right, meets Russia's Vladimir Putin yesterday to discuss the crisis. Picture: AP
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GREECE’S chances of avoiding a painful exit from the euro got a temporary lifeline yesterday to help the country cope with a bank deposit drain, and turned its hopes to a European leaders’ summit next week.

The latest decision by the European Central Bank (ECB) to approve more emergency credit came after it emerged anxious Greeks had withdrawn more than €1 billion in a single day, according to bank sources.

Including the billion taken out on Thursday, savers have reportedly withdrawn €3bn from Greek banks since talks between Athens and its creditors collapsed last weekend.

The European Union president warned the situation was “getting critical” as Greece approaches a deadline on 30 June, when it has to make a debt repayment it cannot afford without more loans from creditors.

Uncertainty over whether Greece might default on that payment – something that could lead to the country eventually falling out of the euro – increased after a meeting on Thursday ended in discord over what reforms the country should make to get more loans.

Several European countries are now openly saying they are getting ready for the possibility that Greece might leave the euro.

“The game of chicken needs to end and so does the blame game,” European Council president Donald Tusk said in a video message. “We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default.”

In the streets of Athens yesterday, there were no visible signs of distress or larger than usual queues at banks. Officials, however, signalled an increase in withdrawals and transfers.

An EU official said Greeks had taken about €2bn out of accounts in the last three days and confirmed the ECB had approved more emergency credit but did not disclose an amount.

“Money is going out of the Greek banks faster than at any time before,” said the official, who spoke only on condition of anonymity because of the sensitive nature of the situation.

The ECB has been steadily increasing the support it allows Greek banks to draw on. It is not thought the bank would turn off that tap until it thinks Greece is definitely going bust, and certainly not before an emergency summit of the eurozone’s 
19 leaders on Monday.

However, if no deal emerges with creditors soon that will allow the country to meet upcoming debt payments, starting with the one at the end of the month, the ECB would be under intense pressure to stop pumping money into a banking system that might collapse. The creditors want Greece to agree new reforms and a tighter budget before they give it more loans.

Greece’s radical left-led government, on the other hand, came to power in January on the promise to end such measures, which may have helped tame the budget deficit but have also increased poverty and unemployment. Greece has to pay €1.6bn to the International Monetary Fund on 30 June. It cannot afford that without a deal that would unlock €7.2bn in bailout loans.

Around Greece yesterday, newspaper headlines warned time was running out. The daily Ethnos called Monday’s summit the “Last Chance for a Deal” while the pro-government Efimerida ton Syntakton said creditors had put a “Knife to our Throat.”

Athenian Giorgos Tsakoyiannis, 55, said he believed a deal would emerge eventually.

“When two parties want to resolve something, there’s no way it won’t happen,” he said. “It looks extreme, but politics is never extreme. It’s a dirty game.”

Greek prime minister Alexis Tsipras, who visited Russia to meet president Vladimir Putin, sought to portray Monday’s summit as “a positive development on the road to agreement.” He claimed that those “who invest in crisis and horror scenarios will be proven wrong.”

“We sought final negotiations to be at the highest political level in Europe and now we are working for the success of this summit,” he said. The central bank of Greece said “the gap between Greece and its creditors is not a large one.” As finance ministers from across the 28-country EU wrapped up talks in Luxembourg yesterday, there were indications that technical talks would resume over the weekend before eurozone finance ministers meet again on Monday ahead of the leaders’ summit later in the day.

“We are a little sceptical,” German finance minister Wolfgang Schaeuble said. “But maybe the readiness in Greece to do what is necessary will increase over the weekend. The ball is in Greece’s court.”

But he added: “I’m not so sure I will be able to announce sensational news to you on Monday.”

It is not just eurozone countries that would be affected by a Greek exit from the euro. Some investors think a so-called Grexit could be another “Lehman Brothers” moment for the world economy – sparking a destabilising chain reaction, the way the collapse of the investment bank did in 2008.