Faced with an increase in demand but no extra funding from the European Central Bank, the Greek government ordered banks closed. Prime Minister Alexis Tsipras said in televised address Sunday that as a result of a denial by Greece’s creditors for a short extension of the bailout program, the government has been forced to introduce capital controls and keep its banks closed on Monday.
“This decision led the ECB today to limit the liquidity of Greek banks and forced the central bank of Greece to propose a bank holiday and a restriction on bank withdrawals,” said Tsipras in a televised address.
Greek lawmakers approved Prime Minister Alexis Tsipras’ request for a July 5 referendum on Greece’s creditors’ latest bailout terms. However, Greece’s current bailout expires Tuesday and without an extension the country faces defaulting on its US$1.8 billion International Monetary Fund (IMF) loan.
As a result, Greece may be in the midst of an urgent financial situation by the time the day of the vote arrives.
Officials from the IMF have also deliberately inserted themselves into the debate surrounding the referendum. IMF spokesperson Gerry Rice told Bloomberg Business that the fund fully expects the payment to be made Tuesday and should Greece fail to pay that, they would immediately be in arrears.
Being in arrears means Greece would be unable to receive any further loans from the IMF.
Meanwhile IMF chief Christine Lagarde said Greek government’s planned July 5 referendum will be based on bailout terms for the country that are no longer valid as the current program expires on June 30.
But Lagarde nonetheless made a pitch to Greeks, encouraging them to vote yes in next Sunday’s referendum. According to the unelected official, if the vote produced “a resounding yes” to remaining in the euro, then creditors would also be willing to make an effort, she told the BBC.
Lagarde said there was still time for the Greek government to accept the proposals from creditors, despite having varied little from its initial calls for austerity reforms, including lowering of wages and pensions.
The latest counter-offer from creditors was deemed unacceptable by the leftist Syriza government, which was elected on a platform to end austerity in the country.
Prime Minister Tsipras has framed the question of a referendum as a question of democracy. This appears to be resonating with the Greek people, who are standing by their government.
“He absolutely did the right thing. Of course I will vote against the lenders proposals,” said Areti Kazanzioglou, 40, a private sector employee. “Europe is all about democracy, and not what the institutions are trying to do to us.”
Prime Minister Tsipras is calling for a “no” vote in Sunday’s referendum while pro-European Greek opposition parties have condemned the decision to call the referendum.
See also: On the Delphi Declaration, by Michael Hudson
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