Greece announced early Monday it will shut banks for a week and impose capital controls, pleading for calm after anxious citizens emptied cash machines in a dramatic escalation of the country`s debt crisis.
Banks will be closed until July 6 — the day after a referendum on bailout proposals — with a 60-euro (USD 65) limit on ATM withdrawals, but foreign tourists, a vital engine of the Greek economy, will be exempt from the restrictions, a decree published in the official government gazette said.
In the first market reaction to the growing risk of a Greek euro exit, the single currency tumbled in Asia Monday morning.
Stock markets also fell sharply, with Tokyo, Sydney, Shanghai and Hong Kong each sinking more than 2 percent by Monday afternoon.
The drastic measures to protect Greece`s banking system against the threat of mass panic came after the European Central Bank said it would not increase its financial support to Greek lenders, despite early signs of a chaotic bank run.
It capped a weekend of high drama that began with Prime Minister Alexis Tsipras`s unexpected call for a July 5 referendum on creditors` latest reform proposals after bailout talks in Brussels collapsed.
In response, angry EU and IMF creditors rejected a request to extend the nation`s bailout beyond its June 30 expiry date, sparking fears Greece could default on a key debt payment to the IMF due the same day and possibly crash out of the eurozone.
Uncertainty over how events will unfold in coming days prompted crowds to form long queues outside some ATMs in Greece, leaving many cash machines dry.
Keen to stave off panic, Tsipras assured Greeks their deposits were “totally safe”.
“Any difficulties that may arise must be dealt with calmness. The more calm we are, the sooner we will get over this situation,” he said, adding that Athens had again requested a “prolongation of the (bailout) programme”.
With the Athens stock exchange closed Monday, other global markets were expected to follow Asia`s lead in what is set to be a highly volatile day of trade as investors return to their desks to find Greece hurtling towards default.
“We have had a slow bank jog in Greece and most thought that there would be an agreement eventually, at the last minute. That is no longer true,” said Emma Lawson, a senior currency strategist at National Australia Bank.The Frankfurt-based ECB`s governing council earlier Sunday held a crisis telephone conference and pledged to maintain emergency liquidity assistance — keeping open its life support for Greek banks and, by extension, the Greek state.
But it pledged no extra cash for banks.
