Greece said it would close banks on Monday in a bid to prevent its banking system from collapsing after the European Central Bank moved to cap the amount of emergency loans it provides for the country’s cash-strapped lenders.
Greece’s move to avert the threat of a bank run comes amid a dramatic escalation of the country’s debt crisis after Greek Prime Minister Alexis Tsipras surprised European policy makers Friday by calling a Greek referendum on whether to accept the terms of the country’s creditors to unlock badly needed financial aid.
Mr. Tsipras’s gambit means Athens will almost certainly default on a €1.54 billion ($1.72 billion) payment it owes the International Monetary Fund on Tuesday. Greece’s international bailout expires the same day, meaning the country would no longer be under the umbrella of an international rescue package. Finance ministers of other eurozone countries rejected Greece’s request for a one-month bailout extension to give it time to hold the referendum.
The ECB said earlier on Sunday that it wouldn’t increase the lifeline of emergency liquidity that has been sustaining Greece’s banks, even as nervous Greek depositors appeared to withdraw their money at a greater pace over the weekend. source