The Greek stock exchange and banks will remain shut down till next Monday, July 6 and ATM withdrawals will be limited to 60 euros a day, with an effort to bolster Greek credit controls after international creditors refused to extend the country’s bail out, financial industries reported.
Chief executive of Piraeus Bank announced that both the financial exchange market and the banks will be sealed off from public access, following a meeting of government and finance officials.
Greek Prime Minister, Alexis Tsipras, will address the Greek people this evening and provide details of Greece’s economic future that also threatens the Eurozone.
With funding from the European Central Bank (ECB) keeping the Greek banks afloat, a domino effect could follow an unfavourable change in Athens as it heads towards a default and possible exit from the eurozone.
The former ECB board member Lorenzo Bini Smaghi told the Italian daily Corriere della Sera on Sunday that the ECB will no longer be able to back Greek banks, as uncertainty looms the county.
"Given the uncertainty over Greece remaining in the euro the ECB will no longer be able to supply liquidity to the Greek banks, who in turn will be unable to supply euros to their clients," he said, according to the report.
He then continued to note the tragedy which the Greek citizens are likely to expect.
“They will rush to withdraw their money out of banks but will “probably not be able to do so," he said.
Greece’s funding options are close to hitting rock bottom while nervous savers continue to withdraw billions of euros out of the banks, as debt talks look likely to fail.
Every euro pulled out from an ATM is supported by emergency funding from the ECB. Without an extension to the bailout programme, these ECB emergency loans are at risk.
Greek Prime Minister Alexis Tsipras on Sunday called his nation to vote in a referendum for bailout terms, offering proposals to reduce the pressure on bank balance sheets. Thus, each proposal comes with a cost.
If the ECB was to curb 89 billion euros of emergency funding, the cash strapped country will have two main options - bank holiday or capital controls - the Financial Times reports.
A bank holiday is known to be a day when banks are officially closed. However, this has a negative impact on the economy as bank transactions officially come to a halt. This, on the other hand, is seen to be the best way to protect banks from failure during a stressful period.
Conversely, capital controls make room for withdrawals from ATMs and some payments but do have limits. This process is a little more difficult as it take minimum three days to take place and banks need sufficient funds available to meet demands.
If a wave of capital controls hits the debt burdened country or the banks ultimately fail, those with no other financial security outside of Greece will be the most affected.
Greece is heavily indebted to the EU and the IMF, almost 240 billion euros, since the Eurozone economic crisis seriously hit the country’s economy from 2009 to the present.
Athens says it cannot afford the $1.8 billion amount which has to be paid to the IMF by the June 30 deadline.
Eighteen countries, which are participating in the eurozone, have accused Greece of dropping out of negotiations and vowed to do all that is necessary to stabilize the Euro bloc.
The President of the European council, Donald Tusk announced on Sunday that he was associating with all the Euro currency countries and they reassured Greece will remain within the common currency zone.
Various EU officials said there was still time to snatch a late deal if Greece returns to the negotiation table.
"To those who wonder what's next, 1. Greece should stay in euro; 2.The door is still open for negotiations on latest EU Commission proposals," EU Economics Commissioner Pierre Moscovici said.
Manuel Valls, Prime Minister of France, on Sunday advised the Greek administration to follow on with talks.
"I cannot resign myself to Greece leaving the euro zone ... We must find a solution," Valls told Europe 1, Le Monde and iTELE in a joint interview.
Christine Lagarde, chief of the International Monetary Fund, announced that if the referendum vote on Tuesday resulted in "a resounding yes" to endure within the Eurozone and solve the problems of the Greek economy, then the creditors would be more assistive and lenient in sealing a deal.