RPT-Greece may find it is easier to close banks than re-open them

30 Jun 2015 | Author: | No comments yet »

Global stocks slump as Greece’s debt crisis deepens.

THE JSE fell sharply on Monday, in line with global markets, after Greece failed to secure a financial lifeline with its international creditors, which cast doubt over its future in the eurozone.AS Europe’s sharemarkets prepare to reopen in the coming hours, world leaders are pleading with the Greeks to vote in favour of a referendum on their nation’s bailout.

The 170-member all share index fell as much as 2.14%, mirroring hefty losses across the European and Asian equity markets, as investors pondered the implications of Greece potentially leaving the single-currency area — the so called “Grexit”. Greece’s possible exit from the eurozone now appears alarmingly imminent, as Athens confirmed it would be unable to afford a €1.55 billion loan repayment to the International Monetary Fund by today’s deadline. Amid the ongoing unrest, Melbourne’s Greek community have today voiced their fears for Greece as the country lunges towards a financial crisis, with many feeling pressured to send funds to loved ones. With Greece’s domestic equities market closed, NBG’s small trading arm was spending time reassuring clients, not trading, according to a person familiar with the situation. Mounting concerns about Greece has driven down international markets after talks between the country and its creditors broke down, as thousands of anti-bailout protesters hit the streets.

A Greek government official said on Monday the country would not pay a €1.6bn loan installment due to the IMF on Tuesday. “Greece is certainly going to drive global volatility in the short term,” Caleo Capital market analyst Lloyd Priestman said on Monday, adding: “The real question is whether the market views a Grexit (exit from the eurozone) as a failure of the eurozone. That would result in a far greater sell-off that would undoubtedly spill over into our markets.” The JSE’s main indices settled lower on Monday, with media and internet company Naspers topping the losers’ board in the top 40 index after shedding 4.71% in value. Tsiparas is urging his citzens to vote against the bailout package, which risks leading to a messy transition away from the euro currency and could cause global financial turmoil. Greek Prime Minister Alexis Tsipras has reportedly rejected the latest proposal on Greece’s new funding conditions offered by creditors and called for a referendum to be held on July 5. Compounding the situation was the ECB’s decision to freeze emergency funds for the Greek banks, forcing the beleaguered country to impose short-term capital controls and shut the banks until this weekend. “So now the big question is what effect it will have on the rest of Europe’s markets and the global markets … beyond today and perhaps most of this week.

European Commission chief, Jean-Claude Juncker, said he felt “betrayed” by the “egotism” shown by Greece in failed debt talks, according to the BBC. When Cyprus’s banks were subject to capital controls in 2012, the then-U.K. regulator pushed the nation’s top two banks to change U.K. branches’ legal structures, so it could keep a closer eye on them. No one knows for sure, but Greece’s economy has shrunk by some 30% since 2007.” Capital Economics chief emerging markets economist Neil Shearing said the real risk was that the crisis in Greece triggered broader contagion to the eurozone and financial markets across the globe. “In the event that this happened, we suspect that the fallout would be more serious than the onset of (US) Fed tightening, which has been the focus of emerging market investor concerns over the past few months,” Mr Shearing said. He said Greek proposals were “delayed” or “deliberately altered” and the talks had been broken “unilaterally” after Mr Tsipras announced the referendum. That involved the Bank of Cyprus and Cyprus Popular Bank to become subsidiaries, rather than branches, a move that allowed their deposits to be covered by a U.K. deposit protection scheme guaranteeing the safety of deposits up to £85,000.

Resource sectors, particularly gold miners, held up after China’s decision at the weekend to cut interest rates and to reduce the amount of capital that the banks must hold in reserve for lenders to boost economic growth. What interests me is not the euro but guaranteeing a dignified way of life for the next generations,” 50-year-old Vanguelis Tseres, who has been unemployed since the start of the debt crisis in 2010, told AFP in Syntagma square in the capital.

Mr Juncker warned Greeks they “shouldn’t choose suicide just because you are afraid of death,” urging them to vote “Yes” as a “No” vote would be a no to Europe. After the European Central Bank capped its emergency support for Greece’s banks, the Greek government to close banks and announce limits on withdrawals. Daily cash withdrawals are capped at 60 euros ($87) per account. “Whenever you see any kind of bank line, there is in the back of investors’ mind the thought: ‘What if it spreads?

Investors bought German and British government bonds, which are seen as safe havens, and sold bonds issued by Greece’s government, sending those yields sharply higher. But Mr Greenhaus thinks that this episode in the European debt crisis isn’t as dangerous as previous ones. “We do not think this is Armageddon for the global economy,” he said.

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