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Greek Drama: Government Imposes Bank Holiday, Capital Controls
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Greece continued on its way down the road to financial collapse on Sunday, as Prime Minister Alexis Tsipras announced that banks across the country would remain closed tomorrow and that capital controls would be put in place, limiting the amount of money depositors can withdraw on a given day.
The announcement followed a decision by the European Central Bank not to increase emergency funding to Greek banks, which Tsipras has denounced as "blackmail" and "an unprecedented act by European standards." The prime minister added that deposits in Greek banks were safe, addressing fears of a total financial meltdown.
Tsipras had called for a referendum to be held next Sunday on the conditions Greece's creditors—the International Monetary Fund, the ECB and other eurozone countries—were demanding for a further bailout, which included cuts to salaries and pensions as well as tax increases. Parliament approved the referendum last night, and Tsipras's left-wing Syriza party is encouraging citizens to vote "no," but there may be nothing to vote on anymore as the current bailout program expires Tuesday and the creditors have no intention of extending it. The European Commission took the unusual step of publishing the latest proposals for a bailout deal, but it's not clear whether these proposals are still on the table.
The real question Greek voters may be answering in the referendum, therefore, is whether to keep the euro at the price of acceding to the ECB and IMF's austerity demands, or to be the first country to exit the eurozone, causing a global financial panic and consigning Greece's already depressed economy to further decline. Tsipras had hoped that by holding out the threat of the latter, he could get a better deal from the other eurozone countries; his gamble appears not to have paid off. It is not clear what will happen if the Greeks vote "no," or what will happen to Tsipras's leftist government if they vote "yes."
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Greece continued on its way down the road to financial collapse on Sunday, as Prime Minister Alexis Tsipras announced that banks across the country would remain closed tomorrow and that capital controls would be put in place, limiting the amount of money depositors can withdraw on a given day.
The announcement followed a decision by the European Central Bank not to increase emergency funding to Greek banks, which Tsipras has denounced as "blackmail" and "an unprecedented act by European standards." The prime minister added that deposits in Greek banks were safe, addressing fears of a total financial meltdown.
Tsipras had called for a referendum to be held next Sunday on the conditions Greece's creditors—the International Monetary Fund, the ECB and other eurozone countries—were demanding for a further bailout, which included cuts to salaries and pensions as well as tax increases. Parliament approved the referendum last night, and Tsipras's left-wing Syriza party is encouraging citizens to vote "no," but there may be nothing to vote on anymore as the current bailout program expires Tuesday and the creditors have no intention of extending it. The European Commission took the unusual step of publishing the latest proposals for a bailout deal, but it's not clear whether these proposals are still on the table.
The real question Greek voters may be answering in the referendum, therefore, is whether to keep the euro at the price of acceding to the ECB and IMF's austerity demands, or to be the first country to exit the eurozone, causing a global financial panic and consigning Greece's already depressed economy to further decline. Tsipras had hoped that by holding out the threat of the latter, he could get a better deal from the other eurozone countries; his gamble appears not to have paid off. It is not clear what will happen if the Greeks vote "no," or what will happen to Tsipras's leftist government if they vote "yes."
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