Global finance fears grow as Greece faces economic meltdown

Several Western countries issued travel warnings for Greece on Sunday, as the Greek government shut down all banks and imposed capital controls following the breakdown of talks between Athens and the European Union. British and American citizens traveling or living in Greece were advised to have enough cash on hand, as ATMs were quickly running out of currency. In a late-night televised address to the nation, Greek Prime Minister Alexis Tsipras said banks would remain closed until July 6 –the day after Greeks vote in a nationwide referendum on whether to accept the bailout terms proposed to Greece by its creditors. Police tightened security around ATM machines, as lines were reportedly formed in petrol stations in the capital.

The decision to shut down the banks was taken after finance ministers in the eurozone –the a monetary union of 19 European Union (EU) member states that have adopted the euro as their common currency– rejected Athens’ request to prolong a financial-assistance program. The decision could prompt Greece to default on a €1.5 billion payment to the International Monetary Fund, one of Greece’s main creditors. Additionally, the European Central Bank, which oversees Greece’s banking system, refused on Sunday to infuse cash to the Greek banks, in order to accommodate the mass withdrawal of cash by panicked citizens. On Saturday, Greece’s Minister of Finance, Yannis Varoufakis, was not allowed to attend a eurozone meeting in Brussels –a historic first that could mean Greece is close to being kicked out of the eurozone and maybe even the EU as a whole.

Finance ministers of the 18 countries that attended Saturday’s meeting issued a joint statement pledging “to do whatever it takes to stabilize the common currency area” and shield it from possible domino effects caused by the Greek financial meltdown. However, it is difficult to predict what will happen to the financial markets if Greece declares a default, as some of the world’s largest banking institutions share ownership of the country’s mammoth €300 billion debt. Financial analysts warned that the euro will become “increasingly vulnerable” to ripple effects from the Greek crisis, while the London-based Financial Times crisis meeeting the developments in Greece were “expected to trigger a sharp reaction” in the world’s markets this week. The big question, said The Times, is whether the economic fallout from the latest dramatic developments would be limited to Greece or become “a global event”. There was no question, said the paper, that the markets were “at a critical juncture” and that investors were “taking the possibility of contagion very seriously”.

Meanwhile, several European countries announced they will be holding emergency meetings on Monday. German Chancellor Angela Merkel invited German party leaders to a crisis meeting, while the office of French President Francois Hollande said he would be holding a “restricted emergency cabinet meeting” to discuss the developments in Greece. The British government said its ministers were “taking steps” to protect the country from possible economic turbulence in the eurozone –of which the United Kingdom is not a member. British newspaper The Observer said in a lengthy editorial published on Sunday that the Greek crisis, coupled with rising tensions over immigration from the Middle East and North Africa, heightened terrorism fears, as well as the impending British EU referendum, were causing a “perfect storm [of] tension and division at Europe’s core”.

► Author: Joseph Fitsanakis | Date: 29 June 2015 | Permalink: https://intelnews.org/2015/06/29/01-1724/