With banks closed, Greece teeters on the brink of total collapse

The crisis in Greece shows no signs of alleviating, with banks closed for more than a week starting Monday, and the stock market suspended, after the European Central Bank refused to offer more money to keep the country afloat. The country’s banks, kept afloat by emergency funding from the European Central Bank, are on the front line as Athens moves towards defaulting on a €1.6 billion payment due to the International Monetary Fund on Tuesday.

European leaders are now facing one of the worst moments in the history of the Euro. President Obama called German Chancellor Angela Merkel on Sunday, and the two agreed to take all steps to try to resolve the crisis. Prime Minister Alexis Tsipras slammed a draft proposal from Europe and the International Monetary Fund, and said he would put it to the Greek people in a referendum on July 5. Since then, European officials have been focusing their efforts on how to limit the damage.

Greeks queued in their thousands at cash machines for a second day to withdraw their savings. By the evening, six out of 10 ATMs were empty as banks struggled to replenish them fast enough. The Greek government last night ordered a bank holiday and imposed strict limits on how much people could withdraw in a bid to halt a full-blown bank run. In Britain, the Foreign Office urged tourists to take cash, warning that the credit card and ATM network cannot be relied upon.

The turmoil in Greece comes just as Europe’s economy seemed to be reawakening. Recent data show that the Euro-zone economy expanded by 0.4 percent during the first quarter — the fastest rate of growth in about two years. Perhaps most importantly, the recovery seemed to be spreading throughout Europe. France and Italy, two of the region’s largest economies, registered solid growth during the quarter after years of struggling to emerge from the global recession.

So what happens now? Even though Greece is likely to exit the euro zone, it will be crucial — for both social and geopolitical reasons — to ensure that it isn’t untethered from Europe. Its European partners — no matter how frustrated they are now — have an important responsibility. If they are unable to maintain Greece as a full member of the European Union, they need to quickly come up with some type of association agreement.

Images: AP