International creditors such as International Monetary Fund, European Central Bank and European Commission have demanded Greece to establish further austerity measures in the nation's banking systems. However, the Greeks have overwhelmingly rejected the European Union's offer. And because of the bailout program, the Asian and global markets have exorbitantly slumped.
Following Greece's resounding rejection of an international bailout deal, the benchmarks in Asia and Europe have fallen sharply alongside the U.S. stocks, on Monday, while the Chinese shares reared the trend after regulators and the securities industry intervened to support the markets. But now, fear over the imminent collapse of the Greek banking system has intensified.
In the rescue package referendum that would have kept the debt-ridden Greece afloat by subjecting to additional austerity measures, the Greeks surprisingly said no in a result of 61 to 39. According to USA Today, the rejection has casted doubt on the country's future in the eurozone.
The effects of the rejection drastically lowered the Asian and global markets. The DAX index was 1.5 percent lower in Germany and France's CAC 40 dropped 1.9 percent. Britain's FTSE 100 was down 0.6 percent while On Wall Street, which was closed Friday for the Independence Day holiday, S&P 500 futures were down 0.8 percent whereas the Dow was 0.9 percent lower and the Nasdaq 0.9 percent. Tokyo's Nikkei 225 index tumbled 2.1 percent and in Hong Kong, the Hang Seng index fell 3.2 percent.
Aside from the stocks, oil prices also plummeted as benchmark U.S. crude dropped $2.43, or 4.3 percent, to $54.50 a barrel in electronic trading on the New York Mercantile Exchange. And the euro most recently bought $1.10, down 0.6 percent.
Fortunately, European stock markets recovered some ground after Greek Finance Minister Yanis Varoufakis announced his resignation after opening sharply lower, The Guardian reported.
Financial markets indeed faced a more turbulent week after Greece rejected the bailout terms demanded by the international creditors. Thus, European leaders are expected to convene for a meeting on Tuesday to discuss a response to the severe rejection, which suggests the possibility of a banking collapse that could force Greece out of the 19-member eurozone.
Financial experts said without more emergency funding, Greece's banks could soon run out of cash within days, Forbes noted. Last week, banks were shut to avoid a run on deposits and customers have been given limited ATM withdrawals. And amid the Greek turmoil, Athens' stock market remains closed.
Despite the early declines in the Asian and global markets, there were no signs of panic. And the big reason why global markets are not in crisis is due to the fact that the Greek crisis is not new. Several financial institutions globally have already reduced their exposure to Greek debt. And Greece is also a very small part of the eurozone economy.
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