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Greece shuts banks as ECB cuts off new emergency support

Greece shuts banks
The Greece debt crisis took a dramatic turn after Greece shut banks over the weekend and moved to imposed capital controls, to avoid the country’s financial system from collapsing amidst nationwide chaos. Greece will keep its banks closed on Monday and place restrictions on the withdrawal and transfer of money, said Prime Minister Alexis Tsipras in a televised address, as Athens tries to avert a financial crisis. The Greece debt crisis deepens further after ECB cut off the emergency loans available for Greek banks, as the bailout talks with the international creditors failed. The fate of the nation is in serious jeopardy after the move put Greece closer than it ever has been to a potential exit from the eurozone. The banks will remain closed until July 7 in an attempt to avoid further panic.

It was just last week when ECB agreed to increase its emergency funding to Greek lenders for the sake of heavy deposit withdrawals, while the government was trying to crack a new debt deal with international creditors. Unfortunately, the bailout talks broke down over the weekend and the European Central Bank, in an emergency session on Sunday, opted out of any further emergency loan program that has been keeping the Greek banks afloat while the depositors pulled out their money. Tsipras slammed a draft proposal from Europe and the International Monetary Fund, and said he would put it to the Greek people in a referendum on July 5. He blamed the European authorities for the decision, and said they were seeking to “stifle the will of the Greek people. They will not succeed.”

Greece faces a deadline for the loan payment to the IMF, which the country looks almost certain to default. The breakdown of the bailout talks immediately triggered a sharp reaction on the financial markets on Monday. The Euro was almost down by 1 percent and European stock markets also opened to heavy losses. The banks remain closed, leading to long lines at ATMs in Athens, especially outside the National Bank branches. People are concerned as cashing of cheques are halted and fixed term deposits are on lock down. And the daily withdrawals would be limited to €60, or about $67. The Athens stock exchange will also be closed. Tourists may still have access to cash. Visitors are not subject to the capital controls, and the debit and credit cards issued abroad should function normally.

European leaders are now sitting ducks amidst one of the worst financial crisis ever in the history of the nation that could probably force Greece out of the eurozone. The United States also came forward with its intervention in the ongoing crisis. President Barack Obama called German Chancellor Angela Merkel on Sunday, and the two agreed to take all necessary steps possible to avert the crisis. European officials are also working on damage control measures. The fate of the nation now solely depends on whether the ECB reconsiders its decision. Not to mention, if Greece defaults on the debt it owes to the IMF, the financial implications of Greek exit from the euro could be devastating, more than investors seemed to imagine. It can create instability in the eurozone and its effects could resonate across the world.