Asian stock markets sank Monday after Greece closed its banks and imposed capital controls in a dramatic turn in its struggle with heavy debts.
Oil prices declined and the euro edged down against the dollar after Athens announced the moves to stanch the flow of money out of Greek banks and put pressure on creditors to offer concessions before a bailout program expires Tuesday.
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Tokyo's Nikkei 225 index fell 2 percent to 20,283.98 points. The Shanghai Composite Index was off 0.4 percent at 4,178.56 despite China's surprise weekend interest rate cut.
Hong Kong's Hang Seng lost 1.7 percent to 29,192.67. Seoul's Kospi shed 1.6 percent to 2,057.52 and Sydney's S&P/ASX 200 was off 1.8 percent to 5,447.80. Market benchmarks in Taiwan, Singapore and New Zealand also fell sharply.
After an 8-hour session, Greece's Cabinet decided banks would remain shut for six business days and restrictions would be imposed on cash withdrawals. The Athens Stock Exchange will also be closed Monday. The developments follow Prime Minister Alexis Tsipras' sudden weekend decision to call a referendum on European and International Monetary Fund proposals for Greek reforms in return for vital bailout funds.
The accelerating crisis has raised questions about whether Greece might withdraw from the 19-nation euro currency, a move dubbed Grexit.
"Even if a deal is somehow reached, the ability of Greece to implement agreed reforms is doubtful," said IHS Global Insight economist Rajiv Biswas in a report.
Greek withdrawal from the euro could lower Asian economic growth by 0.3 percent next year due to disruption in trade and financial markets, Biswas said.
Globally, Greece's brinksmanship with its creditors is unlikely to have as severe an impact as the financial panic set off by the collapse of Lehman Bros. in September 2008, economists said.
"Today, the European banks have shed much of their Greek debt and they have significantly increased their capital," said Mark Zandi, chief economist at Moody's Analytics.
"A Greek default and exit from the euro zone would be devastating to Greece's economy, but no one else's," said Zandi. "So, the Greek standoff will be disconcerting to financial markets, but only temporarily."
The European Central Bank has vowed to do whatever it takes to prevent a financial panic.
The ECB is a committed to buying 60 billion euros a month in bonds to push down interest rates and help euro zone economies. It could buy more and flood financial markets with cash to calm jittery investors.
"They stand ready to do whatever it takes," says Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.
China's rate cut, the fourth since November, appeared to be aimed at reassuring investors after a plunge in share prices last week, rather than boosting economic growth, analysts said.
Beijing cut its benchmark lending rate by 0.25 percentage point and freed up money for lending by lowering the reserves banks are required to hold.
The timing is "rather market-friendly" and appears to be meant to "provide a support to the market sentiment," said Credit Suisse economists Dong Tao and Weishen Deng in a report.
Wiseman reported from Washington D.C.