Banks in Greece shut down Sunday after Greeks withdrew over €1.3 billion euros since Friday. The European Central Bank (ECB) said it would not increase emergency funding to Greece.
Capital controls were imposed on Greek citizens. A maximum of €60, or $66, can be withdrawn from an account in one day. Overseas transfers of cash are prohibited except for necessary, pre-approved transactions.
Long lines in front of ATMs across the nation have become the norm. “People are scared,” said one Greek citizen.
Banks are expected to remain shut down until July 7, when Greece receives more bailout money.
The financial turmoil in Greece stems from the Wall Street implosion of 2008. When the American markets crashed, the world’s markets crashed as well.
The New York Times reported Greece was especially affected, and announced in 2009 it had been understating its deficit figures for years. Greece was no longer allowed to borrow money, and in 2010 it was nearing bankruptcy. The European Central Bank issued the first of two bailouts for Greece which ended up totaling over $264 billion. The conditions of the loan were harsh, requiring large budget cuts and steep tax increases.
Instead of going toward the economy, most of the money was used to pay off existing debt. The economy shrunk by over 25 percent in five years, and unemployment is over 25 percent.
Greece may go bankrupt and leave the eurozone, which would likely send shockwaves that reverberate throughout the world.
The Prime Minister, Alexis Tsipras, assured the public that Greek deposits were safe.
Robert Peston, a BBC economics editor, offered the following analysis on the BBC website: “The temporary closure of banks in Greece, and the introduction of capital controls, is very bad news for Greece. Greek people will have less money to spend and business less to invest; so an already weak economy will probably return to deep recession.”