Shares slide as deepening Greek crisis shakes global markets

Share prices slumped across Europe on Monday as Greece shuttered its banks for a week following a fateful weekend that has shaken Europe’s single currency.

The Greek government decided on Sunday night it had no option but to close the nation’s banks the following day after the European Central Bank (ECB) raised the stakes by freezing the liquidity lifeline that has kept them afloat during a six-month run on deposits.

In London. the FTSE 100 tumbled by 150 points – more than 2% – when trading began at 8am BST. There were even sharper falls across Europe, with the French and German markets both tumbling by 4%. European banking shares were the hardest hit, suffering losses of up to 10%.

Live Greek crisis: stock markets slide after capital controls imposed - live updates

Overnight in Tokyo, the Nikkei index had fallen almost 3% while in Hong Kong shares slid 2.5%.

The euro fell to its lowest level against the pound in seven and a half years, hitting 0.69855 pence. Oil was also hit, falling by more than a dollar to $62.10 a barrel for Brent crude. But gold, a traditional safe haven in times of trouble, rose by 0.7% to $1,183.

“The Greek butterfly looks set to cause a tornado in financial markets,” said Michael Hewson, chief markets analyst at CMC Markets UK. “In the process we could well also find out if this event turns out to be the equivalent of the butterfly flapping its wings in New Mexico, going on to cause a hurricane in China.”

David Cameron said Downing Street had been preparing for months for the possibility of a Greek exit from the euro, adding that he would put the “final touches” to a plan in a meeting later on Monday.

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Asked on BBC Radio 4’s Today programme if the Greek referendum this week effectively amounted to an “in-out” vote on the euro, the prime minister said. “I think that’s what the referendum will come down to. If it’s a no vote I find it hard to see how that is consistent with staying in the euro.”

The Athens Stock Exchange will not reopen on Monday. The dramatic move, after 48 hours of sensational developments in Greece’s long-running battles with creditors, was prompted by the call on Friday night by the country’s prime minister, Alexis Tsipras , for a referendum on its creditors’ demands. That prompted eurozone finance ministers to effectively put an end to Greece’s five-year bailout by the International Monetary Fund, the ECB and the European commission.

The commission reiterated on Monday that the door remains open to a deal.

Jean-Claude Juncker, the European commission president, is expected on Monday to appeal to Greece to come back to the negotiating table, but will not make any new proposals.

On Sunday, the commission took the unusual step of releasing the draft bailout agreement that creditors had been negotiating with Greece before talks broke down.

“We are some centimetres away from an agreement,” tweeted Pierre Moscovici, France’s European commissioner, adding that there was an open door to further talks. “We must find a compromise. I want a reformed Greece to stay in the eurozone without austerity.”

Meanwhile, Angela Merkel will hold emergency talks with senior German politicians on Monday afternoon.

The German chancellor spoke to the US president, Barack Obama, on Sunday, with the two leaders agreeing that it was “critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the eurozone”, according to a White House statement.

The US Treasury secretary Jack Lew spoke to his counterparts in Germany and France, as well as Tsipras and the head of the IMF, Christine Lagarde. The US is urging all sides to resolve the crisis: it has called for Greece’s creditors to discuss debt relief ahead of Sunday’s referendum, but is also counselling Athens to adopt “difficult measures to reach a pragmatic compromise”.

In a brief, televised address to the nation on Sunday night, Tsipras blamed the eurozone leaders. He did not say how long the banks would remain shut, nor did he give details of how much individuals and companies would be allowed to withdraw once they reopened.

In the early hours of Monday morning, Tsipras published a decree in the official government gazette setting out the capital controls to be imposed.

The decree – entitled “Bank Holiday break” – was signed by Tsipras and the Greek president, Prokopis Pavlopoulos.

It said all banks would be kept shut until after the referendum on 5 July and that withdrawals from cash machines would be limited to €60 – about £40. Cash machines were not expected to reopen until later on Monday.

Foreign transfers out of Greece are prohibited, although online transactions between Greek bank accounts are to continue as normal. Tsipras insisted that pensions and wages would be unaffected by the controls.

http://www.theguardian.com/business/2015/jun/29/stock-markets-dive-as-deepening-greece-crisis-shakes-euro?