There have been long queues at ATMs all across Greece (Pic courtesy BBC)

Greek banks are closed and will stay shut for the week as the country’s debt crisis took a dramatic turn.

Greeks are struggling to find cash, but cash machines were due to reopen at noon local time (10:00 GMT).

Greece decided on Sunday to shut banks and restrict cash withdrawals after the European Central Bank resolved not to extend emergency funding.

It followed the failure on Friday of talks with Greek creditors on continuing with the bailout programme.

A critical deadline looms on Tuesday, when Greece is due to pay back €1.6bn to the International Monetary Fund – the same day the bailout expires. Default is feared and possible exit from euro.

The French cabinet met in emergency session. President Francois Hollande said afterwards that a deal was still possible if the Greeks wanted it.

“There are a few hours before the negotiation is definitively closed, in particular for the prolongation of the Greek aid programme.”

In its decree bringing in the bank restrictions, the Greek government cited the “extremely urgent” need to protect the financial system due to the lack of liquidity.

The main points are:

  • Banks closed till 6 July
  • Cash withdrawals limited to €60 (£42; $66) a day for this period
  • Cash machine withdrawals with foreign bank cards permitted
  • Pension payments not part of capital controls
  • Banking transactions within Greece allowed

Queues formed briefly in Athens on Monday morning, a BBC reporter says, but dispersed quickly in anticipation of the cash machines opening in the afternoon.

The crisis came to a head on Saturday after Greece and eurozone countries failed to reach agreement on payment of the last tranche of bailout money.

PM Alexis Trispras then called a surprise referendum for 5 July on the latest terms offered by Greece’s creditors.

In reaction to the crisis, the London, Paris, Frankfurt and Milan stock markets fell sharply in early trading on Monday, following similar falls in Asia.

The euro lost 2% of its value against the the US dollar. Government borrowing costs in Italy and Spain, two of the eurozone’s weaker economies, have also risen. (BBC)