Euro off Greece-driven lows after SNB intervenes

29 Jun 2015 | Author: | No comments yet »

Greece in limbo as it shuts banks, puts limits on cash withdrawals to avoid financial collapse.

Pensioners wait outside a branch of the National Bank of Greece hoping to get their pensions, in Thessaloniki on Monday. ATHENS, Greece — Banks and ATM machines were shut throughout Greece on Monday, the first day of capital controls announced by the government in a dramatic twist in the country’s five-year financial saga.German Chancellor Angela Merkel says that Europe must be able to find compromises but also must stick to its principles — insisting that aid can only be offered in exchange for efforts by the countries that receive it.Despite the closures, pensioners lined up just after dawn at bank branches hoping they would have access to their pensions, which were due to be paid by today.

Share prices have slumped across Europe as Greece shuttered its banks for a week following a fateful weekend that has shaken Europe’s single currency. The bank closures came after Greeks rushed to ATMs over the weekend to withdraw money following Prime Minister Alexis Tsipras’ surprise call for a referendum on creditor proposals for the reforms Greece should take to gain access to blocked bailout funds. The Greek government decided on Sunday night it had no option but to close the country’s banks the following day after the European Central Bank (ECB) raised the stakes by freezing the liquidity lifeline that has kept them afloat during a six-month run on deposits.

She said: “Europe can cope much, much better with crisis situations such as we have in connection with Greece because we have achieved a lot together.” Transport Minister Christos Spirtzis says fares in greater Athens for the capital’s metro, tram, bus and trolley-bus services will be scrapped effective Monday. The capital controls are meant to staunch the flow of money out of Greek banks and spur the country’s creditors to offer concessions before Greece’s international bailout program expires Tuesday.

But his announcement in Athens in the early hours of Saturday morning of a referendum to be held next Sunday – five days after the Greek bailout was expected to expire – took even some in his own party by surprise. Luis de Guindos said economic contagion is much less likely to happen now than it was in 2011 and in 2012, when many feared a Greek economic implosion could destabilize Spain financially. The accelerating crisis has thrown into question Greece’s financial future and continued membership in the 19-nation shared euro currency — and even the European Union. As euro zone finance ministers arrived in Brussels at lunchtime on Saturday for their fifth emergency eurogroup meeting in just over a week, the signs were not promising. The head of Germany’s main business lobby group says Greece cannot be kept in the euro “at any price” and that the immediate impact on German industry of a possible Greek exit would be limited.

But gold, a traditional safe haven in times of trouble, rose by 0.7% to $1,183. “The Greek butterfly looks set to cause a tornado in financial markets,” said Michael Hewson, chief markets analyst at CMC Markets UK. “In the process we could well also find out if this event turns out to be the equivalent of the butterfly flapping its wings in New Mexico, going on to cause a hurricane in China.” David Cameron said Downing Street had been preparing for months for the possibility of a Greek exit from the euro, adding that he would put the “final touches” to a plan in a meeting later on Monday. Greek finance minister Yanis Varoufakis left the meeting and briefed the press, and the remaining 18 members of the euro zone reconvened to discuss measures to stabilise the euro zone. A man looks at an electronic stock indicator at a securities firm in Tokyo on Monday as global stock markets sank after Greece closed its banks and imposed capital controls. (Shizuo Kambayashi/Associated Press) Asian stock markets sank with indexes in Tokyo, Hong Kong and Sydney down more than two per cent.

Asked on BBC Radio 4’s Today programme if the Greek referendum this week effectively amounted to an “in/out” vote on the euro, the prime minister said. “I think that’s what the referendum will come down to. He added: “it is hard to calculate the indirect consequences, on the countries of the eurozone, the financial markets and economic expectations in Europe.” Macedonia’s central bank says it has taken “protective” measures to limit outflows of money to neighboring Greece, which has itself limited money withdrawals and transfers. Overnight, 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. A defiant Tsipras welcomed the outcome of the vote. “We don’t need to ask permission from Mr Schaüble [the German finance minister] or Mr Dijsselbloem to let the voice of the Greek people be heard,” he tweeted. “We will be holding the referendum next Sunday, honouring the sovereignty of our people and our future.” The focus on Sunday turned to the ECB governing council’s decision on whether to increase emergency liquidity assistance to the Greek banking system. That prompted eurozone finance ministers to effectively put an end to Greece’s five-year bailout by the International Monetary Fund, the ECB and the European commission.

The government announced bank transaction restrictions late Sunday night, limiting daily withdrawals to 60 euros ($82.72 Cdn) per person per ATM card. On Sunday, the commission took the unusual step of releasing the draft bailout agreement that creditors had been negotiating with Greece before talks broke down. “We are some centimetres away from an agreement,” tweeted Pierre Moscovici, France’s European commissioner, adding that there was an open door to further talks. “We must find a compromise. I want a reformed Greece to stay in the eurozone without austerity.” The German chancellor spoke to the US president, Barack Obama, on Sunday, with the two leaders agreeing it was “critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the eurozone”, according to a White House statement.

Precedent suggests it could be superseded by events – four years ago, then prime minister George Papandreou cancelled a planned referendum on austerity measures after reaching agreement with creditors. Speaking on private Antenna television, he said retirees would be allowed to access their full pensions in cash due to the fact that many don’t have bank cards. The US is urging all sides to resolve the crisis: it has called for Greece’s creditors to discuss debt relief ahead of Sunday’s referendum, but is also counselling Athens to adopt “difficult measures to reach a pragmatic compromise”.

France’s finance minister says this week marks a moment of truth for both Greece and Europe but that talks can resume anytime as a Tuesday deadline looms for a bailout program. 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.

Michel Sapin told France-Inter radio that “Greece is trapped by reality, by hard reality” as the Paris Bourse dropped more than 4 percent at opening Monday. Tsipras blamed the Eurogroup, the gathering of the eurozone’s finance ministers, and its decision to reject a request for the bailout program, which expires June 30. Pierre Moscovici, the European commissioner for economic affairs, said negotiations were cut off when an agreement seemed within reach, and he said now the situation largely rests on a ‘yes’ vote in Greece. As Wolfgang Schaüble said, a default does not necessarily mean Greece would exit the euro, though his Austrian counterpart admitted on Sunday that a Grexit was more or less inevitable.

The country’s negotiations with its European creditors have been suspended, with both sides accusing each other of being responsible for talks breaking off. Greece’s finance ministry later announced that the strict ATM withdrawal limits would not apply to holders of credit or debit cards issued in foreign countries. Its economy has shrunk by about a quarter in a depression that has so far lasted more than six years, while its unemployment rate is hovering above 25 per cent.

These leaders were “the only ones”, he said, who could overturn the decision of finance ministers taken on Saturday and enable the ECB to restore liquidity to banks. Drivers also flocked to petrol stations across Greece, prompting the country’s largest refiner to reassure motorists that there were enough reserves. The supply of our refineries with crude oil is also assured.” Greece’s plight deteriorated sharply on Friday night when Tsipras put his country’s future in the balance by suddenly calling a referendum and arguing robustly for a rejection of the price set by his creditors for the lifeline, at least for a few more months. Yared suggested that this could increase borrowing costs for weaker economies in southern Europe, unless the eurozone takes steps towards greater integration. “This in itself will justify some structural risk premium unless there is an institutional change or further economic convergence.”

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