Efforts to bring an end to the Greek financial crisis increased yesterday, as United States Treasury Secretary Jack Lew urged a continuation of work towards a resolution. Mr Lew told Greek Prime Minister Alexis Tsipras that Athens and its creditors needed to continue working towards a resolution before a Greek referendum on the creditors' demands for austerity.
A US Treasury spokesman said Mr Lew told Mr Tsipras in a phone call it was important for Athens to show a commitment to reforms and for all parties to discuss possible debt relief for Greece.
After bail-out talks between the Greek Government and foreign lenders broke down over the weekend, the European Central Bank froze vital funding support to Greece's banks, leaving Athens to take steps to keep the banking system from collapsing.
Washington was monitoring the situation closely and Mr Lew offered to stay in close touch in the coming days, the Treasury spokesman said.
Mr Tsipras yesterday said Greek banks would remain closed until after the July 5 referendum on whether to accept new austerity measures proposed by the European Union. He intend campaigning against the measures.
Mr Lew also stressed the need for Greece ''to take necessary steps to maintain financial stability'' before the referendum, including working closely with international partners, the Treasury statement said.
In phone calls on Sunday, he urged top European finance ministers and the International Monetary Fund to keep working together towards a ''sustainable solution'' to reforms in Greece and its recovery within the euro zone.
Reuters reported banks would be closed and the stock market shut all week and there would be a daily 60 ($NZ96.60) limit on cash withdrawals from cash machines which would open today. Capital controls were likely to last for many months.
Even as Mr Tsipras was on television urging calm, lines were forming at petrol stations and in front of the dwindling number of bank machines still containing cash, highlighting the scale of the disaster facing Greeks who had endured more than six years of economic decline.
The failure to reach a deal with creditors left Greece set to default on 1.6 billion of loans from the IMF due on June 30. Athens must also repay billions of euros to the European Central Bank in the coming months.
Massey University professor Christoph Schumacher said negotiations between Greece and its creditors had gone from bad to good and back to bad.
The German economist said the negotiations had gone bad because the EU and the IMF were insisting on strict reforms and Mr Tsipras would not agree as he had campaigned on the promise to end austerity.
Mr Tsipras and Finance Minister Yanis Varoufakis had been playing a dangerous game, Prof Schumacher said.
''They believe Greece is too big to fail and have been blocking reform suggestions. I hope they are not overplaying their hand.
''The EU has already indicated a Greek default will not be the end of the euro zone or EU.''
If Greece continued to reject reform measures, the EU was unlikely to bail it out, he said.
Greece would have to declare bankruptcy. From an economic perspective, that might not be the worst outcome. Greece would have a chance to start again - but on its own - and the EU could finally move on and stop spending billions on bailing out a country that did not want to reform.
''From a political and humanitarian perspective, a Greek default would be a tragedy,'' Prof Schumacher said.
Meanwhile, global financial markets are bracing for a wave of contagion from Greece today.
Heavy losses are expected for southern European government bonds and regional stock markets as investors scramble to discount a possible ''Grexit'' most had still assumed was unlikely as late as Friday afternoon.
At a glance
• Banks will close until to July 6. All credit institutions in Greece, including branches of foreign banks, are affected.
• Finance minister may shorten or extend bank holiday period.
• ATMs will open from this morning (NZ time). Daily cash withdrawals limited to 60. Limit can be changed by finance minister.
• Payments via debit or credit cards to accounts within Greece and online banking transactions within Greece allowed; but payments and transfers to accounts outside Greece prohibited.
• Cash withdrawals at ATMs with bank cards issued by foreign banks allowed. Withdrawal limits may be set by finance minister.
• All other transactions not permitted.
• Special committee will approve banking transactions deemed necessary to safeguard public or social interest, including medical expenses or pharmaceutical imports.
• Pension payments exempt from capital controls.
• Interest surcharges on due payments not allowed during bank holiday period.
• Banks breaching rules face fines of up to 10% of amount of transaction violating control measures.
