Greeks pull out over $1 bn euros out of banks in single day

With less than 2 weeks left before it defaults on IMF loan, people fear govt may impose capital controls

Greeks pulled more than 1 billion euros out of their banks in a single day, banking sources said on Friday, as the country edged closer to the brink of default despite upbeat remarks from Prime Minister Alexis Tsipras.

With less than two weeks left before Greece will default on an IMF loan unless the government reaches a deal with creditors, financial markets fear the authorities may have to impose capital controls to prevent savers from emptying the banks.

The governors of the European Central Bank, which is keeping the Greek financial system on life support by providing emergency funds, were due to hold a telephone conference to discuss how much cash it could continue to provide.

Including the billion withdrawn on Thursday, savers have pulled 3 billion euros from Greek banks since talks between Athens and its creditors collapsed over the weekend, the banking sources told Reuters. That represents about 2.2% of household and corporate deposits held by Greek banks at the end of April. The figures were provided on condition of anonymity as the statistics were not yet officially published.

Failure to clinch a deal with creditors by the end of this month would see Greece default on a 1.6 billion euro loan payment to the IMF, making it the first euro zone member to go broke and potentially driving it out of the single currency.

Tsipras's government has refused creditor demands that it impose tax hikes and spending cuts, particularly to pensions, which Athens says would deepen one of the worst economic depressions of modern times and make its debt problems worse.

Nevertheless, Greek share prices rose after Tsipras's office issued a statement saying there would be a solution that would return Greece to growth while keeping the euro. He welcomed plans for an emergency summit on Monday of the currency zone's leaders as "a positive development on the road toward a deal".

"All those who are betting on crisis and terror scenarios will be proven wrong," he said. "There will be a solution based on respecting EU rules and democracy which would allow Greece to return to growth in the euro."

Euro zone finance ministers met in Luxembourg on Thursday and were joined by non-euro EU colleagues on Friday. But officials have made clear scant progress on Greece is expected at those talks with leaders preparing to convene next week.

Two officials with knowledge of the Luxembourg talks said ECB executive board member Benoit Coeure told the finance ministers he was unsure whether Greek banks would open next week. 

"Tomorrow, yes. Monday, I don't know," the sources quoted Coeure as telling the ministers on Thursday, when asked whether banks would open on Friday.

The IMF's chief also raised the stakes on Thursday by telling Greece there would be no grace period for its June 30 deadline to make the 1.6 billion euro payment.

"We have entered the 11th hour of this Greek crisis and we urge the Greek government to do a deal before it is too late," British finance minister George Osborne told reporters on entering the EU meeting. "We hope for best but we now must be prepared for the worst."

Tsipras was due to meet President Vladimir Putin on the second day of a visit to Russia on Friday - a trip that has raised eyebrows given the EU is at loggerheads with Moscow over the violence in eastern Ukraine. Russia's deputy prime minister said Moscow could consider giving financial aid to Greece, although Russia has previously played down such prospects.

UNTIL THE LAST MINUTE

So far, there have been no signs of panic on the streets of Athens or queues forming outside bank branches.

But if deposit flight continues faster than the extra emergency liquidity assistance (ELA) that the European Central Bank has granted Greek lenders, it could force Athens to impose capital controls, as Cyprus did in 2013, to curb withdrawals.

"There are no lines or panic, it has been a quiet and gradual phase of withdrawals," said one of the bankers who disclosed the figures for withdrawals. "They are due to worries whether a deal will be clinched with the country's lenders."

The Greek central bank, which oversees Greek banks as part of a system for the single currency led by the ECB, declined comment. A government spokesman has previously denied plans for imposing capital controls.

European Council President Donald Tusk has convened Monday's emergency euro zone summit to discuss Greece "at the highest political level".

"We are asking for the clearest possible commitment for a solution that will allow Greece to breathe and render its debt viable," Dimitris Papadimoulis, a lawmaker from Greece's ruling Syriza party in the European parliament told Greek Skai TV. "Efforts are being made to bridge the differences."

A senior ally of German Chancellor Angela Merkel, who faces growing resistance from her own ruling conservatives to granting Greece more cash, said Berlin was willing to negotiate with Greece "until the last minute". But he urged Athens to follow the example of Spain, Portugal and Ireland in implementing economic reforms.

Although fed up with years of austerity, the majority of Greeks want to stay in the euro zone. Thousands took to the streets on Thursday night calling for a deal.

"The silent majority has spoken: we are staying in Europe," the conservative Greek daily Eleftheros Typos said, commenting on the rally.