Euro off Greece-driven lows after SNB intervenes

29 Jun 2015 | Author: | No comments yet »

Global stocks sink after Greece closes banks.

BEIJING (AP) — Global stock markets sank Monday after Greece closed its banks and imposed capital controls in a dramatic turn in its struggle with heavy debts.Any doubts that the left-wing government in Athens would cave in to the demands of the international creditors keeping Greece afloat were dispelled on Saturday as the great debt drama entered another act.

Oil prices declined and the euro edged down after Athens announced the moves to stanch the flow of money out of Greek banks and pressure creditors to offer concessions before a bailout program expires Tuesday. In scenes that spoke more of defiance than fear, leading Syriza party figures applauded prime minister Alexis Tsipras’s surprise decision to give Greek voters the final say over the terms of a bailout deal proposed by the EU and the IMF. The high-stakes move of calling a referendum only days away from the deadline for a €1.6 billion loan repayment to the IMF may have raised fears of default, but in governing circles it was welcomed with glee. “On July 5th, Greeks will have the opportunity to say a resounding ‘no’ to their brazen demands,” deputy social security minister Dimitris Stratoulis told reporters before a parliamentary debate on the referendum. “And that will arm the government with a new determination to apply its programme. I am optimistic, very optimistic.” After several days of heated discussions in Brussels, the Greek prime minister returned to Athens late on Friday, rejecting the €8 billion worth of tax rises, pension cuts and wage cuts creditors had set as the precondition for the release of desperately needed bailout funds.

Since late 2009, when it became clear that, without help, the Greek economy was heading towards insolvency, the country has lost over a quarter of its GDP, and seen unemployment reach a record 27 per cent and poverty levels soar. Fears that the population may now refuse to swallow the price of further assistance was evident on the streets yesterday, when depositors worried about imminent capital controls rushed to withdraw cash from banks. “The mood is very brittle,” said Giorgos Christodoulakis, a newspaper vendor. “There’s an element of uncertainty that has really unnerved people.

Speaking to the Observer, Aristides Hatzis, a professor of economics and law at Athens University, likened the decision to “the government acting like a suicide bomber”. “It is a very risky decision that could jeopardise Greece’s position not only in the euro zone but the EU,” he said. “I thought Tsipras would be pragmatic and accept a deal that would ultimately have allowed him to consolidate his position on the moderate left. “Instead, with this decision he has allowed his ideologue, Bolshevik side to take over. Greek withdrawal from the euro could lower Asian economic growth by 0.3 percentage points next year due to disruption in trade and financial markets, Biswas said. China’s rate cut, the fourth since November, appeared to be aimed at reassuring investors after a plunge in share prices last week, rather than boosting economic growth, analysts said. The timing is “rather market-friendly” and appears to be meant to “provide a support to the market sentiment,” said Credit Suisse economists Dong Tao and Weishen Deng in a report.

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