Greece has ordered a bank holiday for the next six days, closing all banks until a referendum vote is held next week. The move comes as talks broke down on the Greek debt crisis. To prevent a bank run, the banks are closed and the government in Athens has put limits on withdrawals from an ATM to just 60 Euros, about $67 US dollars, per day, per customer. Tourists may still withdrawal as much as they want, but odds are that the ATMs will be empty of cash very soon. Unless further austerity measures are put in place, it seems unlikely that anyone is going to help bailout Greece. The next debt payment is due by Wednesday and Greece appears to be ready to default on the loans they have received.
The financial crisis in Greece has been brewing from years now. It all goes back to those darn mortgage-backed securities which caused the Crash of 2008. The Greeks funded their welfare state by investing in those securities which had fueled the derivatives market to the point of implosion. Now the piper must be paid and Greek citizens are none too happy about it.
Reaction in the markets is obvious. In the Eurozone, the French and German exchanges each lost about 3.5% today. On Wall Street, the NYSE opened down nearly 200 points, about 1.1%. While not yet at a panic level, how this gets resolved may have a profound impact on financial markets in the long term. Greek voters will have to decide if they want to stay in the Eurozone. If so, then that means cuts in pensions and government services. It will also mean higher taxes and more capital restrictions. Should Greece decide to leave the EU, it could take several months to switch back to their own national currency, the drachma.
The lines are long at ATMs as the banks are closed in Greece for at least the next six days. Worse yet is that Greek citizens may only withdrawal 60 Euros per day. The Greek debt crisis continues to drag on as negotiations failed to come up with an immediate fix this weekend. While some ′experts′ say that the same thing cannot happen in America, others argue that we are in the same, leaky boat. This is what happens when governments spend more than they can afford to for many years.