The euro dropped close to 2 percent on Monday, spiking volatility to the highest level since 2008 during the global recession, while borrowing costs soared for Greece, Italy, and Spain following a decision yesterday by the ECB to not extend credit to Greek banks and capital controls were imposed by the Bank of Greece after their creditors decided against extending a debt bailout beyond June 30th.
The euro plummeted 1.9 percent on Monday and touched 1.0987 while yields on the Italian and Spanish 10 yr. government bonds surged over 7 percent, raising concerns over an expected Greek default on June 30th that has already rattled investors’ nerves and pushed European indexes and U.S. stock futures decidedly lower.
Late last week, Greek Prime Minister Alexis Tsipras walked away from the negotiating table with Greece’s creditors and announced shortly later an upcoming Greek referendum vote on July 5th about whether to accept bailout terms from Greece’s creditors that would keep the cash strapped country in the 19 member euro currency union.
Greece has a €1.6 billion payment that is due to the IMF on June 30th along with billions more that are due to their creditors next month.
European Central Bank President Mario Draghi met with his governing council on Sunday and decided to freeze the level of emergency aid to Greece’s banks until Wednesday July 1st when the governing council will reconvene to determine whether to increase emergency funding to Greek banks.
Greek Prime Minister Alexis Tsipras announced yesterday on Greek television that capital controls would be imposed to protect Greek banks from becoming insolvent with concerns growing over massive withdrawals. Cash withdrawals are now limited to €60.
Greek banks remain closed for a 6 day bank holiday but tourists in the country are allowed to withdraw more money from ATM machines across Greece.
Later today, German Chancellor Angela Merkel will conduct emergency talks with senior German officials, according to the U.K’s Guardian.
European Commission President Jean Claude Junker is believed to make a last minute appeal for Greece to return to the negotiating table while making new proposals.
-Johnathan Schweitzer email@example.com