Tourists make their way past a European Union flag and a Greek national flag at the seaside of the island of Paros, Greece. The nation’s banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a €1.6bn payment due to the International Monetary Fund tomorrow.

Reuters/Athens/Frankfurt


Greek banks and the stock exchange will be shut today after creditors refused to extend the country’s bailout and savers queued to withdraw cash, taking Athens’ standoff with the European Union and the International Monetary Fund to a dangerous new level.
Greece’s banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a €1.6bn payment due to the International Monetary Fund tomorrow.
The ECB had made it difficult for the banks to open today because it decided to freeze the level of funding support it gives the banking system, rather than increasing it to cover a rise in withdrawals from worried depositors.
Amid drama in Greece, where a clear majority of people want to remain inside the euro, the next few days present a major challenge to the integrity of the 16-year-old eurozone currency bloc. The consequences for markets and the wider financial system are unclear.
The head of Piraeus Bank, one of Greece’s top four banks, speaking after a meeting of the country’s financial stability council, said banks would be shut today while a financial industry source told Reuters the Athens stock exchange would not open.
“It is a dark hour for Europe....nevertheless from where we’re sitting we have a clear conscience,” Greek Finance Minister Yanis Varoufakis said earlier in an interview with the BBC.
Asked whether Greece would close banks and impose capital controls he said: “This is a matter that we’ll have to work overnight on with the appropriate authorities both here in Greece and (with the ECB) in Frankfurt.”
Greece’s left-wing Syriza government had for months been negotiating a deal to release funding in time for its IMF payment. Then suddenly, in the early hours of Saturday, Prime Minister Alexis Tsipras asked for extra time to enable Greeks to vote in a referendum on the terms of the deal.
Creditors turned down this request, leaving little option for Greece but to default, piling further pressure on the country’s banking system. The creditors want Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.
Many leading economists have voiced sympathy with the Greek government’s argument that further cuts in spending risk choking off the growth which would give Greece some prospect of servicing debts worth nearly twice its annual national income. Page 16