Greece’s Prime Minister Alexis Tsipras yesterday announced a bank holiday and capital controls after Greeks responded to his surprise call for a referendum on bailout terms by pulling money out of banks.

Tsipras blamed European partners and the European Central Bank for forcing Greece’s hand. He did not give details on how long banks would be shut or the restriction on the movement of capital.

Tsipras also said he sent a new request for an extension of Greece’s bailout – which expires on June 30 – to leaders of eurozone countries and the heads of the ECB, the European Commission, the EU Parliament and the EU Council.

“I am awaiting their immediate response to a fundamental request of democracy,” he said, adding that such a move could prompt the ECB to turn on the liquidity tap again.

“One thing is clear: the refusal of a short extension, and the attempt to nullify a democratic procedure is an act deeply offensive and shameful for the democratic traditions of Europe.

It’s a dark hour for Europe, but we have a clear conscience

Tsipras said bank deposits and wage and pension payments in Greece remained safe and appealed to Greeks to stay calm.

Greece’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 IMF tomorrow.

The European Central Bank added to the pressure by saying there would be no increase in its support of Greece’s crippled banking system. It was monitoring the situation and stood ready “to reconsider its decision,” the ECB added.

Amid drama in Greece, where a clear majority of people want to remain inside the euro, the next few days present a major challenge to the integrity of the 16-year-old eurozone currency bloc.

The consequences for markets and the wider financial system are unclear.

“It is a dark hour for Europe....nevertheless from where we’re sitting we have a clear conscience,” Greek Finance Minister Yanis Varoufakis said in an interview with the BBC. Of bank closures and capital controls he said: “This is a matter that we’ll have to work on overnight with the appropriate authorities both here in Greece and with the ECB in Frankfurt.”

The Finance Ministry later issued a statement saying capital controls were not the government’s preference.

Greece’s left-wing Syriza government had for months been negotiating a deal to release funding in time for its IMF payment. Then suddenly, in the early hours of Saturday, Prime Minster Alexis Tspiras asked for extra time to enable Greeks to vote in a referendum on the terms of the deal.

Creditors turned down this request, leaving little option for Greece but to default, piling further pressure on the country’s banking system.

The creditors want Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

Pro-European Greek Opposition parties have united in condemning the decision to call the referendum on the bailout terms, but people on the streets of Athens backed the decision.

The IMF has pressed European governments to ease Athens’s debt burden, something most say they will only do when Greece first shows it is trimming its budget.

Long lines formed outside many ATMs yesterday, including some of 40 to 50 people outside some in central Athens.

The Bank of Greece said it was making “huge efforts” to ensure the machines remained stocked.

The German Foreign Ministry said tourists heading to Greece should take plenty of cash to avoid possible problems with local banks .

The European Central Bank’s funding line, which is a form of overdraft with the eurozone’s central bank system, would fall to the bloc’s other members to pay if Greece were to leave the eurozone. This has fuelled opposition to extending the line in some European countries.

In economic powerhouse Germany, other southern states that have suffered austerity in return for EU cash and poor eastern countries with living standards much lower than Greece’s, many voters and politicians have run out of patience.

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