Share prices have slumped across Europe as Greece shuttered its banks and severely limited cash withdrawals ahead of a referendum on 5 July.



The Greek government decided on Sunday night it had no option but to order the country’s banks to remain shut on Monday after the European Central Bank (ECB) froze the liquidity lifeline that has kept them afloat during a six-month run on deposits. The Greek financial stability council recommended banks remain shut until next Tuesday.

As the German chancellor, Angela Merkel, said next Sunday’s vote on whether to accept previous bailout conditions was in effect a decision on whether to stay in the euro, fears of fallout across the continent sent markets tumbling.

In London, the FTSE 100 lost 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 falling by 4%. European banking shares were the hardest hit, suffering losses of up to 10%.



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.



In an emotional appeal aimed directly at the Greek people the president of the European commission, Jean-Claude Juncker, urged a “yes” vote next weekend to what he described as a fair proposal – “not stupid austerity”.



“If they vote yes it will mean that Greece wants to stay with other members of the eurozone,” Junker said.



Using his most heated rhetoric to date in a 45-minute press briefing largely devoted to defending his record in negotiations with Athens, he said: “You shouldn’t commit suicide because you are afraid of death.”

Juncker said he felt “a little betrayed” and accused the Greek government of lying about the proposal on the table. “We really moved mountains until the last minute when the Greek authorities closed the door.”

Some analysts criticised the inflammatory tone, saying it would not help. “Juncker was clearly panic-stricken throughout the press conference because Tsipras has not only wrong-footed them but outmanoeuvred them,” said Alexis Mantheakis, former spokesman of Greece’s rightwing LAOS party.

Recriminations were also flying over the prospect of debt relief for Greece. Juncker insisted an offer of debt relief was on the table, but an EU official clarified this was a question for a future bailout package. A close adviser to Tsipras accused the commission of offering nothing new.

Facebook Twitter Pinterest Pensioners queue outside a closed bank in Athens on Monday morning hoping to withdraw some money.

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. The 10-page document does not mention debt relief.



“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.”

Merkel stuck to a more cautious script. She is ready to talk to Tsipras again, according to her spokesman, but thinks it is up to Athens to make the next move.

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.



The prime minister was due to discuss the Greek crisis on Monday afternoon with the chancellor, George Osborne, and the governor of the Bank of England, Mark Carney.

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.”

Facebook Twitter Pinterest A bank manager explains the situation to pensioners waiting outside a branch of the National Bank of Greece. Photograph: Yannis Behrakis/Reuters

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.

Greek debt crisis: the key points of Athens bank controls Read more

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.

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.

Greece’s finance ministry later announced that the strict ATM withdrawal limits would not apply to holders of credit or debit cards issued in foreign countries. This was viewed as a necessary move as tourists were spotted joining locals in front of ATMs on Sunday. Any similar restriction would hurt tourism, Greece’s sole thriving industry, which accounts for at least a fifth of economic activity.

Tsipras said Saturday’s move by the eurozone’s finance chiefs to halt Greece’s bailout programme was unprecedented. He called it “a denial of the Greek public’s right to reach a democratic decision”.

The European commission said on Monday that Greece’s capital controls were “necessary and proportionate”, but free movement of capital would need to be reinstated “as soon as possible in the interests of the Greek economy, the eurozone and the European Union’s single market as a whole”.



Facebook Twitter Pinterest Greece’s prime minister, Alexis Tsipras, addresses to the country. Photograph: AP

Tsipras added that the finance ministers’ initiative had prompted the ECB to curb its assistance, forcing the government’s hand. The Greek prime minister, who has always insisted the crisis can only be solved at the highest political levels, said he had once again appealed for an extension of the bailout until after the referendum, sending his proposal to the president of the European council, Donald Tusk, the leaders of the other 18 member states of the single currency, the commission and the ECB.

These leaders were the only ones, he said, who could overturn the decision of finance ministers taken on Saturday and enable the ECB to restore liquidity to banks.

As fears spread on Sunday that capital controls would need to be put in place, growing numbers of depositors lined up at ATMs, even in affluent city areas, to withdraw what cash they could.



Drivers also flocked to petrol stations across Greece, prompting the country’s largest refiner to reassure motorists that there were enough reserves. Refiner Hellenic Petroleum said: “We maintain fuel reserves for several months. The supply of our refineries with crude oil is also assured.”

Facebook Twitter Pinterest A notice at a petrol station in Athens reads ‘NO Fuel’. Photograph: Milos Bicanski/Getty Images

Greece’s plight deteriorated sharply on Friday night when Tsipras put his country’s future in the balance by suddenly calling a referendum and arguing robustly for a rejection of the price set by his creditors for the lifeline, at least for a few more months. The vote on Sunday will ask Greeks whether they approve or disapprove of the last offer tabled by the creditors before the negotiations broke down.

During a marathon parliamentary debate that ended in the early hours of Sunday morning, opposition leaders argued that it was, in fact, a vote on whether Greeks wished any longer to be part of the eurozone. It will be Greece’s first referendum since the country voted to abolish its monarchy in 1974.

The European commission said on Sunday for the first time in the crisis that it wanted to offer Greece debt relief, Tsipras’s central demand during the five months of stalemated talks. Reports from Berlin said that Merkel and the French president, François Hollande, shared that view.

Analysts are watching the impact of the Greek crisis on other economically weak eurozone economies, such as Portugal and Spain. “The events in Greece are a stark reminder that the current eurozone architecture is vulnerable to domestic politics,” Francis Yared at Deutsche Bank said.

Yared suggested that this could increase borrowing costs for weaker economies in southern Europe, unless the eurozone takes steps towards greater integration. “This in itself will justify some structural risk premium unless there is an institutional change or further economic convergence.”