Markets in a tailspin as Geek debt default looms

Indian markets went into a tailspin on Monday following emergency measures announced by the government amidst fears of an expected debt default by the Greek government after the European Union and other creditors declined to recast its huge loans.

The BSE Sensex fell sharply in early trading on Monday as the deepening Greek crisis rocked global stock and currency markets. Amidst signs of a debt default, the Greek government shut banks and stock markets temporarily to prevent its financial institutions from collapsing.

Greek Prime Minister Alexis Tsipras on Sunday announced that the country's banks would remain shut on Monday after a run on the banks by depositors eager to withdraw their money.

Later the government decided to shut banks and restrict cash withdrawals after the European Central Bank resolved not to extend emergency funding, following the failure on Friday of talks with Greek creditors on continuing with the bailout programme.

During the weekend, Greece's banks were fleeced by depositors following the European Union's decision not to support a fresh loan recast without subjecting the country to fresh austerity measures suggested by creditors.

Prime Minister Tsipras has the nation's backing to resist creditors' moves to inflict more pain on Greeks and the ruptured debt negotiations with the EU and other lenders could end up in Greece walking out of the European Monetary Union.

Greece, which has to make a huge repayment by the end of Tuesday, has scheduled a referendum for next Sunday on whether to accept the terms of an offer from its creditors to release bailout package that would help it meet its financial obligations.

While a referendum is most likely to resist further austerity measures, the emergency measures announced by the government spooked markets across the world.

The closure of banks only helped to escalate the confused and unpredictable state of a crisis that some analysts say could ripple through global financial markets and undercut European unity.

Most Asian markets opened lower on Monday.

An anti-austerity protester burned a euro note at a demonstration in Athens on Sunday after the European Central Bank said it would not expand an emergency loan programme that has been propping up Greek banks in recent weeks while the government was trying to reach a new debt deal with international creditors.