Greece’s economy is on the brink of collapse after the capital controls imposed ahead of Sunday’s referendum left the country with shortages of food and drugs, the tourist industry facing a wave of cancellations and banks with barely enough money to survive the weekend.
Banks said they had a €1bn cash buffer to see them through the weekend – equal to just €90 (£64) a head for the 11 million-strong population – and would require immediate help from the European Central Bank on Monday whatever the result of the referendum, in which the two sides are running neck and neck.
Alexis Tsipras, Greece’s prime minister, was fighting for his political life on Friday night, using a rally to say that a no vote would enable him to negotiate a reform-for-debt-relief deal with the country’s creditors.
The survival of the Syriza coalition, formed just over five months ago to repudiate five years of austerity programmes, was in doubt as Greece started to suffer shortages of basic provisions, including the sale of vital drugs in pharmacies nationwide.
Food staples, such as sugar and flour, were also fast running out on Friday as consumers started to feel the effect of the restrictions.
“We have shortages,” said Mary Papadopoulou, who runs a pharmacy in the picturesque district of Plaka beneath the ancient Acropolis. “We’ve run out of thyroxine [thyroid treatment] and unless things change dramatically we’ll be having a lot more shortages next week.”
Greek islands, where thousands of holidaymakers headed this week, have also been hit, with popular Cycladic destinations such as Mykonos and Santorini reporting shortages of basic foodstuffs. More than half of Greece’s food supplies – and the vast majority of pharmaceuticals – are imported, but with bank transfers now banned, companies are unable to pay suppliers.
Queues were reported at every cash machine in Athens on Friday night and business groups warned that the economic shutdown in the week since Tsipras called the referendum had already caused lasting damage to the economy.
“Imports, exports, factories, firms, transport – everything is frozen,” said Vasilis Korkidis, who heads the national Confederation of Hellenic Commerce. “The only sectors in demand are food and fuel.”
Korkidis said the economy had suffered losses worth €1.2bn in the past week and that the cost would have to be added to any fresh bailout deal. “Even in the best-case scenario, it is going to take months to recover from the shock of closed banks and capital controls,” Korkidis said. “Now that they are in place, capital controls may last for a year.”
Tourism, the mainstay of the Greek economy and its main export earner, has seen an estimated 50,000 holidaymakers cancelling bookings every day since Tsipras walked out of talks in Brussels a week ago. The Greek Tourism Confederation (SETE) announced that bookings were down by 40% in the past few days.
The ECB will meet on Monday to decide whether to step up its help to Greece under its emergency liquidity assistance scheme. The head of Greece’s banking association, Louka Katseli, told reporters: “Liquidity is assured until Monday, thereafter it will depend on the ECB decision.”
SOURCE: Helena Smith, John Hooper and Jon Henley in Athens and Larry Elliott in London