As Greece closes banks, fear of euro implosion spreads

LONDON — As the Greek debt drama hurtles toward a climax, fears are mounting that the outcome could sink not just Greece but also the euro and the idea of the European Union itself.

Athens is dangerously close to bankruptcy after days of fruitless negotiations with international lenders over a new bailout package to keep it afloat. On Sunday night, Greek officials announced that Greece’s ailing banks would be closed today, and perhaps as long as a week, to prevent a further hemorrhage of cash from the financial system. ATM withdrawals could be capped.

Bank depositors have pulled out billions of euros in recent weeks.

In a brief television address, Prime Minister Alexis Tsipras assured Greeks that their savings and pensions were safe. But the extraordinary step, after an emergency Cabinet meeting, sent people to join long lines at ATMs, some of which were empty.

Tsipras blamed the situation on Greece’s creditors for refusing to extend his country’s current bailout past its Tuesday deadline.

Without a new funding deal in place, Greece will almost certainly fail to pay $1.8 billion due to the International Monetary Fund on Tuesday, becoming the first developed country to default on an IMF debt.

That could cause Greece to leave the eurozone, a step whose potential consequences have officials and investors on edge.

In such an event, the Greek economy would be thrown into chaos as the government imposes heavy capital controls, rushes to reintroduce the drachma currency and tries to placate angry citizens and businesses whose savings suddenly plummeted in value.

European officials have expressed exasperation with Tsipras’ government, which abruptly walked out of bailout talks in Brussels on Friday. The two sides have been unable to agree on what Greece must do to raise revenue and cut spending if it wants to continue receiving aid from international lenders.

Tsipras stunned his eurozone partners by announcing Saturday that he would put their bailout proposals to a public referendum next weekend. Moreover, he and his left-wing Syriza party plan to urge voters to reject the proposals.

Athens has proposed higher taxes on the wealthy and big corporations instead, but creditors worry that doing so would hamper growth.