Greece gets temporary lifeline for banks amid uncertainty

ATHENS, Greece (AP) — Greece got a temporary lifeline for its banks Friday to help them cope with a deposit drain in the run-up to a summit of the eurozone's 19 leaders that could determine the country's future in the euro.

Uncertainty has grown after a meeting Thursday on the reforms Greece must make to get more loans ended in acrimony. Greece has a debt payment on June 30 it cannot afford and a default could eventually see it drop out of the euro.

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Several European countries are now openly saying they are getting ready for such a possibility. In the streets of Athens, there were no visible signs of distress or larger than usual lines at banks or supermarkets. Officials, however, signaled an increase in withdrawals and transfers, which can also be made electronically.
An EU official said Greeks had taken about 2 billion euros ($2.3 billion) out of their accounts in the last three days. "Money is going out of the Greek banks faster than at any time before," said the official, who spoke only on condition of anonymity because of the sensitive nature of the situation.

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As a result, the European Central Bank's governing council decided Friday to provide more emergency credit for Greece's banks to help them cope with the situation. A Greek banking official, who spoke only on condition of anonymity because the announcement was not made public, confirmed the decision. The official declined to give a sum.
The ECB has been steadily increasing the support it allows Greek banks to draw on — it did so just two days ago. It's not thought it would turn off that tap until it thinks Greece is definitely going bust and certainly not before an emergency summit of the eurozone's 19 leaders on Monday.

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However, if no deal emerges with creditors soon that will allow the country to pay upcoming debt payments, starting with one at the end of the month, the ECB would be under intense pressure to stop pumping money into a banking system that might collapse.
The creditors want Greece to agree to new economic reforms and a tighter budget before they give it more loans. Greece's radical left-led government, on the other hand, was elected in January on the promise to end such measures, which may have helped tame the budget deficit but have also increased poverty and unemployment.
Time is running out — Greece has to pay 1.6 billion euros to the International Monetary Fund on June 30. It cannot afford that without a deal that would unlock 7.2 billion euros in bailout loans. Relations between the sides have soured in recent days, with each side blaming each other in increasingly strident language.

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Around Greece on Friday, newspaper headlines warned time was running out. The daily Ethnos called Monday's summit the "Last Chance for a Deal" while the pro-government Efimerida ton Syntakton said creditors had put a "Knife to our Throat."
Athenian Giorgos Tsakoyiannis, 55, said he believed a deal would emerge. "When two parties want to resolve something, there's no way it won't happen," he said. "It looks extreme, but politics is never extreme. It's a dirty game."
Greek Prime Minister Alexis Tsipras, who is due to meet Russian President Vladimir Putin in St. Petersburg later following the signing of a gas deal between the two countries, sought to portray the events in a good light. He said Monday's summit is "a positive development on the road to agreement," claiming that those "who invest in crisis and horror scenarios will be proven wrong."

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"We sought final negotiations to be at the highest political level in Europe and now we are working for the success of this summit," he said. And in a statement Friday, the Bank of Greece noted the "great effort" the Greek government has made. "The gap between Greece and its creditors is not a large one," it added.
As finance ministers from across the 28-country European Union wrapped up talks in Luxembourg, there was hope that technical talks will resume over the weekend before eurozone finance ministers meet again on Monday ahead of the leaders' summit later in the day.

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Finnish Finance Minister Alexander Stubb said that "right now, it's touch and go." It's not just eurozone countries that would be affected by a Greek exit from the euro. Some in the markets think a so-called Grexit could be another "Lehman Brothers" moment for the world economy — sparking a potentially destabilizing chain reaction, the way the collapse of the investment bank did in 2008. Others say it would be manageable, though the uncertainties are great.
"We hope for the best but we must be prepared for the worst," said George Osborne, Britain's finance minister. "In the United Kingdom we've taken the measures to increase our economic security so we can deal with risks like this from abroad and clearly now we must go on and complete that plan."
Slovakia's prime minister, Robert Fico, said his country was "mentally and technically prepared" for a Greek euro exit. "We wish for Greece to remain in the eurozone but not at all costs." Investors appeared to take developments in stride, with the Stoxx 50 index of leading European shares up 0.6 percent. The main stock market in Athens was down just 0.3 percent in mid-afternoon trading. The yields on Greek government bonds fell, a sign investors think a deal is near.
In case of bankruptcy, Greece may have no option other than to introduce a new currency — most likely bringing back the centuries-old drachma — to pay wages, salaries and pensions.