Today, the European Central Bank announced it will not increase emergency loans for Greek banks after Prime Minister Alexis Tsipras called for a surprise referendum on a reform deal.
Huge sums of cash were withdrawn from ATMs across the country yesterday, and this has prompted Greece to close all its banks on Monday while it imposes capital controls. It is not known when the banks will open again.
Here's how the analyst reacted to Sunday's events:
Karl Whelan, economics professor at the University College Dublin, said today's decision by the ECB will have major repercussions:
The ECB decision to cap ELA is more dramatic than people seem to think. Without an ELA extension seems unlikely Greek banks can stay open.— Karl Whelan (@WhelanKarl) June 28, 2015
Chris Scicluna, head of economic research at Daiwa Capital Markets, thought the decision could be the trigger for a new currency down the line:
The closure of the banks will have a highly damaging effect on what was already a very weak Greek economy. The cash squeeze on the Greek government is bound to intensify, meaning that domestic payment arrears are bound to mount further while public sector workers and pensioners might well have to be paid with IOUs as soon as end-July. That would likely represent the first steps to issuing a parallel currency.
Richard Perry, market analyst at Hantec Markets was surprised by the pressure the ECB is now placing on the struggling economy:
It looks not great. I have to say I am surprised as to how it is panning out at the moment. Capping the ELA is a fairly significant move as the ECB knows Greek banks are already all but insolvent. They are relying upon the liquidity of the ECB and the lack of extension could well be crippling. This is the ECB really cranking up the pressure on Greece.
Marc Chandler of BBH said he expects equity markets to suffer declines, and not just in the Eurozone:
Some observers argued that the resilience of the euro in the face of the deterioration of the Greek negotiations means that "bad news is good news" for the single currency. We are not convinced. We expect the euro gaps lower in early Asia. We expect equity markets to suffer broad declines. The yen and Swiss franc perform relatively well, as is often the case in financial turmoil.