Greece holds meet as bank run looms

ECB refuses more funding to Greece, Athens mulls capital controls; Varoufakis: Merkel holds key to crisis

The ECB declined to grant extra cash to help Greece’s stricken banking system on Sunday as the government weighed up drastic new measures to contain a growing financial crisis. As the Greek crisis intensified after talks between Athens and its creditors broke down Saturday, Greek citizens have queued at bank machines, heaping pressure on the government to impose capital controls.

Greece said it may impose capital controls and keep its banks shut on Monday. Finance minister Yanis Varoufakis and the central bank chief were set to meet Sunday for an emergency meeting of the “systemic stability council”, amid increasing signs of a bank run. Since Friday night alone, 1.3 billion euros ($1.45 billion) have been withdrawn from Greek banks, said the head of the bank workers’ union Stavros Koukos.

A banking source in Greece that requested anonymity said only 40 per cent of cash machines now had money in them. The German foreign ministry recommended that its citizens travelling to Greece “take sufficient amounts of cash” with them. Mr Varoufakis, pressed in a BBC interview on whether Athens would limit bank withdrawals and overseas transfers, said only that “this is a matter that we’ll have to work overnight on with the appropriate authorities both here in Greece and in Frankfurt”.

The Frankfurt-based ECB’s governing council earlier held an emergency telephone conference and pledged to maintain emergency liquidity assistance, keeping open its life-support for Greek banks and, by extension, the Greek state. However, it pledged no fresh cash for banks, ratcheting up pressure on the Greek government to slap on controls to save lenders from the run on deposits. Greece appeared to head into the uncharted, and likely turbulent, waters of a long dreaded “Plan B”. The long festering crisis took a sharp turn for the worse when leftist Greek Prime Minister Alexis Tsipras stunned Europe with a surprise call for a July 5 referendum on the latest cash-for-reforms package and advised voters against backing a deal that spells further “humiliation”.

French Prime Minister Manuel Valls warned of a “real risk” of Greece leaving the eurozone if it citizens vote against the EU’s bailout proposals in a referendum planned for next weekend. Mr Varoufakis said it was “a dark hour for Europe” but blamed Greece’s international creditors for failing to compromise. “We know that we have bent over backwards to accomodate the institutions, the troika, our European partners. They have not come to the party, they have not met us half way, not even a quarter of the way.” Speaking to the German media, he said Ms Merkel, long Europe’s champion of tough reforms in exchange for bailout cash, “holds the key” to resolving his country’s crisis.

“The EU leaders must act. And among them she, as the representative of the most important country, holds the key in her hand. I hope she uses it,” he told Bild newspaper.

The ECB said it was “closely monitoring the situation in financial markets and the potential implications for the monetary policy stance”. Meanwhile, International Monetary Fund managing director Christine Lagarde said Sunday she is disappointed with the inconclusive outcome of talks with Greece, which is teetering on the brink of a default on its debt to the IMF. At the same time, Ms Lagarde said she is still willing to continue talks with the Greek government in the hope the country can make “appropriate structural and fiscal reforms”.