Greece Imposes Capital Controls as Crisis Deepens, Sensex Plunges

Sensex plunged 500 pts on Monday due to the Greece crisis. Here’s everything you need to know about it. 

Published29 Jun 2015, 03:58 AM IST
Business
3 min read

- Greece forced to move after ECB freezes funding lifeline

- PM Tsipras blames EU partners, calls for calm

- Banks to close until after July 5 referendum

- Cash machines run dry, long queues reported at petrol stations

Greece closed its banks and imposed capital controls on Sunday to check the growing strains on its crippled financial system, bringing the prospect of being forced out of the euro into plain sight.

After bailout talks between the leftwing government and foreign lenders broke down at the weekend, the European Central Bank froze vital funding support to Greece’s banks, leaving Athens with little choice but to shut down the system to keep the banks from collapsing.

Banks will be closed and the stock market shut all week, and there will be a daily 60 euro limit on cash withdrawals from cash machines, which will reopen on Tuesday. Capital controls are likely to last for many months at least.

The more calmly we deal with difficulties, the sooner we can overcome them and the milder their consequences will be.
- A sombre-looking Prime Minister Alexis Tsipras said in a televised address.

He promised bank deposits would be safe and salaries paid.

Greece’s Prime Minister Alexis Tsipras delivering a televised address to the nation from his office at Maximos Mansion in Athens on Sunday. (Courtesy: ERT State Television)
Greece’s Prime Minister Alexis Tsipras delivering a televised address to the nation from his office at Maximos Mansion in Athens on Sunday. (Courtesy: ERT State Television)

Even as Tsipras spoke late on Sunday, lines formed at petrol stations and the dwindling number of bank machines still holding cash, highlighting the scale of the disaster facing Greeks, who have endured more than six years of economic decline.

The failure to reach a deal with creditors leaves Greece set to default on 1.6 billion euros ($1.76 billion) of loans from the International Monetary Fund that fall due on Tuesday. Athens must also repay billions of euros to the European Central Bank in the coming months.

Blame Game

After months of wrangling, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras’s shoulders. The 40-year-old premier caught them by surprise in the early hours of Saturday by rejecting the demands of lenders and calling a referendum on the bailout.

The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

Global Repercussions

Greece Imposes Capital Controls as Crisis Deepens, Sensex Plunges

Sensex in India plunged over 500 points while Nifty fell to 8,217 on Monday morning.

Despite the hardening of positions, officials around Europe and the United States made a frantic round of calls and organised meetings to try to salvage the situation.

U.S. President Barack Obama called German Chancellor Angela Merkel, and senior U.S. officials including Treasury Secretary Jack Lew, who spoke to Tsipras, urged Europe and the IMF to come up with a plan to hold the single currency together and keep Greece in the euro zone. The German and French governments announced emergency political meetings.

French Prime Minister Manuel Valls urged the Greeks to come back to the negotiating table.

“I cannot resign myself to Greece leaving the euro zone ... We must find a solution,” Valls told media.

In Asia, policymakers were watching events closely, though the spillover effects appeared limited for now.

Korea’s finance ministry and central bank discussed the market reaction in meetings on Monday, while Japan’s top government spokesman Yoshihide Suga said the government was in close co-operation with the Bank of Japan over the turmoil.

(With additional inputs on Indian stock markets.)

We'll get through this! Meanwhile, here's all you need to know about the Coronavirus outbreak to keep yourself safe, informed, and updated.

The Quint is now available on Telegram & WhatsApp too, Click here to join.

Never Miss Out

Stay tuned with our weekly recap of what’s hot & cool by The Quint.

Join over 120,000 subscribers!