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Greek Debt Crisis Spurs ATM Panic and Bank Closures
| published June 29, 2015 |

By Keith H. Roberts, Thursday Review contributor

The failure of negotiations between Greece and its numerous creditors has triggered panic and fear in Greece, as pensioners and investors overrun banks, shoppers swarm into stores in search of milk, bottled water and food and supplies, and as average bank account holders attempt to withdraw as much cash as possible before a total meltdown occurs this week.

Tens of thousands of Greeks stood in endless lines near ATM machines all over the cash-strapped country. Most waited for hours only to withdraw a tiny percentage of their savings. Banks closed early, and many banks may remain closed for the remainder of the week. Some Greeks lined up at gas stations to fill the tanks of cars and trucks, and others went on shopping sprees—buying up groceries and household necessities using credit cards which are expected to be worthless within days. Some major credit card companies were already in the early stages of tamping down spending limits for cardholders in Greece.  Most banks limited ATM withdrawals to about $70 per day, a rule which will stay in place for the remainder of the week.

This past weekend Prime Minister Alexis Tsipras announced that he was scheduling a July 5 nationwide referendum on the current slate of proposals between the Greek banks and international creditors. Without a deal, Greece will be bankrupt within days—unable to make payroll or make payments to employees, pensioners, vendors and suppliers, contractors, or foreign lenders and banks.

Greece is already overdue on its past debt payments to the International Monetary Fund, and its current payment—due now—is more than 1.5 billion euro. The Greek government has no way to pay the debt without some form of outside assistance, and few countries or banks are willing to take the additional risk, especially without a specific plan to reduce spending and cut costs.

The meltdown is arguably the worst economic crisis in Greek history, and a Greek monetary collapse could have widespread consequences throughout the European Union and western economies. Greece may also be forced into a withdrawal from the EU and an uncoupling from the euro—the currency in widespread use across much of Europe.

The crisis may also precipitate political chaos in Greece as average citizens find themselves forced to cope with fewer benefits and a greatly reduced lifestyle. Left-wing political groups have long campaigned against the so-called austerity measures, even as conservative groups have demanded more cuts in social services and pension payments. Greek legislators have been unable to find consensus—or any agreement at all—on how to avert disaster.

Some international economists worry that if Greece defaults, and through its upcoming referendum uncouples from the euro, other marginal countries might follow suit—either through internal political pressures or through inaction. Debt-heavy Italy and Portugal could be next in line, spurring a stampede away from the euro and bringing an end to the once-vaunted European Union. Some Greek political watchers say that the pending referendum has morphed into a populist judgment on the euro, more than an attempt to find national agreement on Greece’s economic problems.

Worried retailers were already beginning to limit or restrict the use of credit cards and debit cards in stores, and some smaller retail locations were already refusing to accept credit cards as shoppers began hoarding bottled water, soft drinks, groceries, shoes and household supplies. Banks in Greece were still slowing online transfers—movements of money from one account to another—but were restricting any forms of transfer to accounts outside of Greece.

The government has set up an emergency banking organization to handle special needs cases and hardship situations, such as costly medical treatments and family emergencies where transactions would require moving money out of the Greek economy. Athens says it will approach each appeal on a case-by-case basis.

Related Thursday Review articles:

Greek Default Threatens European Economy; Thursday Review staff; Thursday Review; April 18, 2015.