Global markets slump as Greece closes banks and debt talks falter
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Greece shut its banks and imposed capital controls in a dead-of-night announcement designed to avert the collapse of its financial system as the country edges closer to an exit from the euro. Bloomberg
Global stocks lurched lower Monday as Greece closed its banks and imposed restrictions on cash withdrawals to try to prevent a deepening financial crisis from worsening amid faltering bailout talks with its international creditors.
Markets in Europe traded sharply lower. Germany’s DAX index fell 3%, France’s CAC 40 fell similarly and Britain’s FTSE 100 dipped 1.6%.
Greece’s government ordered the Athex composite index closed for a week to try to contain collapsing share prices. Major indexes across Asia saw equally sharply moves lower. In Tokyo, the Nikkei 225 index closed 3% down.
On Wall Street, Dow, Nasdaq and S&P 500 stock futures lost about 1%.
Yields on Greece’s ten-year government bonds moved past 14% and the euro was 0.6% lower against the dollar at $ 1.11.
Over the weekend, Greek Prime Minister Alexis Tsipras said his country would hold a July 5 national referendum on whether to accept austerity measures demanded by the International Monetary Fund, European Central Bank and European Commission in return for releasing the final $ 8 billion of a $ 270 billion financial crisis aid package.
However before that, on Tuesday, Athens needs to pay the IMF a $ 1.8 billion loan repayment or face the prospect of default, a scenario that could increase the possibility of Greece leaving the eurozone, a 19-member economic and currency bloc.
“With negotiations halted, the Greek situation has rapidly moved to the worst-case scenario and investors who jumped to the conclusion last week that a deal was done will be suffering significant losses,” said Alastair George, chief strategist at Edison Investment Research, a consultant.
On Sunday, the ECB froze emergency funding to Greece’s banks that lenders there have been using to meet short-term funding needs.
The capital controls put in place Monday by Greece permit people to withdraw just $ 66 per day at ATMs, a limit that affects residents but not tourists.
About 20% of Greece’s GDP is generated through tourism.
Banks have been ordered to stay close for six days, starting Monday.
Eurozone officials and leaders, including French President Francois Hollande, said Monday that there is still enough time for Greece to reach an agreement with its creditors before a June 30 deadline.
And Jean-Claude Juncker, the president of the European Commission, said in a news conference that negotiators did not deserve the criticism they were receiving from some quarters for so far failing to reach a deal.
“We moved mountains until the very last minute when the Greek authorities closed the door,” he said.
Juncker added that he expected the eurozone to continue to be comprised of 19 members.
Tsipras has accused Greece’s creditors of using “blackmail and injustice” in efforts to broker a deal.
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