Euro opens lower in reaction to Greek capital controls, referendum

The euro opened on Monday with a gap lower against most of its counterparts as markets reacted to the news over the weekend that Greece imposed capital controls and closed banks. Also, Greek Prime Minister Alexis Tsipras called a referendum for Sunday July 5th. Greek citizens are asked to vote on whether they accept Greece’s creditors terms for a new bailout.

Greece has a 1.6 billion euro repayment due to the International Monetary Fund (IMF) on Tuesday, June 30th and without receiving more funds by then, there is a risk of defaulting on this payment. This event increases the chances of a “Grexit” and Greece could leave the Eurozone.

Greece’s creditors’ had offered a five-month extension to Greece’s bailout programme in exchange for reforms but PM Tsipras rejected the terms described the creditors’ proposal as “an insulting ultimatum”. Mr Tsipras’ motion on a referendum easily won backing in the 300-member strong parliament, with at least 179 MPs voting in favour in the early hours of Sunday. Tsipras said that a “no” vote in the referendum would strengthen Greece’s negotiating position.

Greek banks are expected to stay shut until 7 July, two days after Greece’s planned referendum. A maximum of 60 euros can be withdrawn from one account per day and overseas transfers are prohibited. However, the Greek government assured citizens that wages and pensions, as well as bank deposits, were guaranteed.

Meanwhile, Mr. Tsipras said he sent a new request to the creditors for an extension to the bailout.

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