Greece is braced for more chaos on the streets outside its mostly shuttered banks after Athens and its creditors halted talks on resolving the country’s deepening financial crisis until a referendum this weekend.
Banks have been closed all week to prevent a crash from mass money withdrawals, while a few have been reopened to help pensioners without ATM cards.
But they are still in business because the European Central Bank left the terms of its emergency cash support to Greece unchanged, a day after Athens slipped into arrears with the International Monetary Fund and its bailout programme expired.
The move kept chances alive for a settlement between Greece and creditors. And finance minister Yanis Varoufakis publicly thanked the ECB and its president Mario Draghi for the decision.
“This allows us to breathe. It’s a very positive move and a move of good will on the part of the European Central Bank. I welcome it,” he told state television.
Mr Draghi, he said, had faced down “hawks” among eurozone members who had demanded that Athens increase collateral needed to receive continued assistance.
Greece is seeking a third bailout from the eurozone rescue fund after the previous deal expired this week without agreement on the terms of final payouts.
The impasse left billions bailout money frozen or cancelled and saw Greece forced to close banks and its stock market for at least a week, while the country’s left-wing government called a referendum urging voters to denounce the previous deal offered by creditors.
Eurozone finance ministers decided to put the talks with Greece on hold till the vote takes place.
“Given the political situation, the rejection of the previous proposals, the referendum which will take place on Sunday, and the recommendation by the Greek government to vote No, we see no grounds for further talks at this point,” Dutch foreign minister and eurogroup chairman Jeroen Dijsselbloem said after a late-night teleconference.
“There will be no talks in the coming days.”
In Athens, crowds of anxious elderly Greeks thronged banks from before dawn yesterday, struggling to withdraw their maximum of €120 for the week after the government reopened some banks to help pensioners who did not have bank cards.
“It’s very bad,” said retired pharmacy worker Popi Stavrakaki, 68. “I’m afraid it will be worse soon. I have no idea why this is happening.”
Business associations and the country’s largest union urged the government to cancel the vote and the Council of Europe – an independent body that monitors elections and human rights – said the referendum would fall short of international standards.
In a sign of serious financial deterioration, Greece suffered another sovereign downgrade, the fourth this week, as Moody’s slashed the country’s rating from Caa2 to Caa3, or just above default.
Prime minister Alexis Tsipras resisted the pressure, however, insisting a No vote would give the government a stronger negotiating position.
“There are those who insist on linking the result of the referendum with the country’s future in the euro,” he said. “They even say I apparently have a secret plan to take the country out of the EU if the vote is No. They are lying with the full knowledge of that fact.”
Greece is in a financial limbo now that its bailout programme has expired, cutting it off from vital financing and pushing it one step closer to leaving the euro.
It also has become the first developed country to fail to repay a debt to the International Monetary Fund on time. The last country to miss an IMF payment was Zimbabwe in 2001.
As long as it is in arrears on the IMF payment, Greece cannot receive any more money from the organisation.
The referendum has thrown additional confusion into the already fraught negotiations.
German chancellor Angela Merkel said a deal remained impossible before the referendum, while French president Francois Hollande said creditors should seek an accord before then.
“We have to be clear. An accord is for right now, it will not be put off,” Mr Hollande said.