Greece on the Verge of Leaving the Eurozone: People Line Up for Cash as Tsipras Announces a Referendum

“Some Greek banks were beginning to limit cash transactions as hundreds of people lined up outside branches and drained cash machines after Prime Minister Alexis Tsipras called a referendum that could decide his country’s fate in the euro,” Ekathimerini reports.

“Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece,” according to the Greek news agency. One banker said 110 million euros had been withdrawn from his institution as of 11:30 a.m. Athens time on Saturday.

Greek bank deposits by businesses and households fell to 129.9 billion euros in May from 133.7 billion euros the month before, according to data released by Bank of Greece on its website on Thursday.

Greek legislation allows either the Bank of Greece governor or the finance ministry to impose capital restrictions. The extent to which this materializes will depend on the ECB decision over the next 48 hours as well as depositor behavior, George Saravelos, foreign exchange strategist at Deutsche Bank AG, said.

“Athens will ask the Eurogroup to prolong the Greek bailout program for several weeks as the country has to prepare for a referendum on the conditions of the debt deal with international creditors, Finance Minister Yanis Varoufakis said Saturday“, according to Sputnik.

However, “after Greek Prime Minister Alexis Tsipras unexpectedly called for a July 5 referendum on the terms of his country’s bailout package, euro-area finance ministers meeting in Brussels on Saturday rejected his request for a one-month extension to the program. It will expire on June 30, the same day Greek payments to the International Monetary Fund are due.

Dutch Finance Minister Jeroen Dijsselbloem, who headed the meeting, said the Greek government now faces a “big problem” of risk management. Greek Finance Minister Yanis Varoufakis called it a “sad day for Europe.” Ministers continued their meeting on Saturday without Varoufakis,” Bloomberg reports.

Yesterday German Chancellor Angela Merkel pressed the Greek government to accept a “generous” offer made by creditors. As a result of the Greek government’s rejection of the offer to unfreeze rescue funding in four installments through to November, the euro fell.

Austerity measures have seen unemployment rise from 12 to 27 percent in three years, GDP has fallen by 26 percent since 2008, Greeks are under a huge tax burden, and the number of people living below the poverty line is increasing every day, said Prime Minister Alexis Tsipras in the first half of June. Let’s not forget that his Syriza party came to power promising to end austerity.

Over the last five years, Athens has reduced pensions by up to 44 percent, reduced salaries in the private sector by up to 32 percent, and seen its labor market crushed, he added.

“Failure to reach an agreement would, …, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union,” the Bank of Greece said in a statement on June 17.

Hugo Dixon, author of the IN/OUT Question and Columnist, thinks that Tsipras is effectively calling for Greece to quit the euro.