Greek banks are to remain closed and capital controls will be imposed, Prime Minister Alexis Tsipras says.
Speaking after the European Central Bank (ECB) said it was not increasing emergency funding to Greek banks, Mr Tsipras said Greek deposits were safe.
Greece is due to make a €1.6bn (£1.1bn) payment to the International Monetary Fund (IMF) on Tuesday – the same day that its current bailout expires.
Greece risks default and moving closer to a possible exit from the eurozone.
Greeks have been queuing to withdraw money from cash machines over the weekend, and the Bank of Greece said it was making “huge efforts” to keep the machines stocked.
Greek banks are expected to stay shut until 7 July, two days after Greece’s planned referendum on the terms it had been offered by international creditors for receiving fresh bailout money.
The Athens stock exchange will also be closed on Monday.
The existing bailout programme expires Tuesday — so even if the country votes yes, it’s not clear that the deal can be fulfilled.
Much of what happens next depends on the ELA, the ECB emergency assistance to Greek banks mentioned earlier. A trickle of deposits leaving accounts seems to be turning into a river, and pulling away that remaining lifeline would most likely be fatal for the handful of remaining banks. On Sunday, the ECB refused to increase the level of ELA provided, something it had previously done at regular intervals.
To avert the rapid outflows, the government is bringing in capital controls (strict measures to halt too much money leaving bank accounts). Greek banks and the stock exchange will be shuttered Monday, and lines are now snaking around the ATMs that still have money to dispense.
When controls were brought in to tackle the Cypriot crisis in 2013, they worked. Depositors weren’t allowed to withdraw more than €100 (£70.5, $110.70) a day from banks initially. Greeks now will be allowed to withdraw even less, just €60 (£42.30, $66.40) a day.
In Cyprus, businesses buying products from abroad needed to prove directly to the central bank that they were getting something for the money they were sending out of the country. Individuals taking more than a few thousand euros out of the country could have their money seized.
The controls stop the outflows, but they also effectively freeze Greece’s place in the eurozone. It’s not much of a monetary union if you can’t move your money even within it. Cyprus regained some economic confidence with its own strict bailout programme — but that’s precisely what Athens is rejecting.
Greece is now deep into uncharted waters, and Grexit (Greek exit from the eurozone) looks more possible than ever.
Ahead of the referendum, ordinary Greeks seem to be torn between two positions that now seem to be clearly contradictory.
On the one hand, even after half a decade of turmoil, the euro is popular. Few people remember the weak drachma fondly, and overwhelming majorities want to remain in the eurozone.
On the other, the country decided that the fiscal austerity endured over the past five years was a busted flush and elected genuine radicals to take their case to the rest of Europe.
And in the coming referendum, those two instincts will be pitted against each other directly.
The small group of hedge funds betting on a Greek recovery remain invested, still hoping that assets like government bonds and bank stocks will rally once a political solution is reached on the nation’s financial obligations.
“[There’s] no change on the expectation of a deal,” Diego Ferro, co-chief investment officer of $1 billion global investor Greylock Capital Management, said in an email. “This problem has been political from the beginning, the amount of money involved is not that big. So you would expect some bickering to last until it is signed.”
Greylock owns government bonds and bank stocks
Other hedge funds to bet on a Greek recovery include Third Point and Alden Global Capital via Greek recovery-focused funds. Perry Capital and Knighthead Capital Management are among those that own Greek government bonds, according to recent conversations with people familiar with the situation.
“Although the situation will likely continue to deteriorate before it improves, we maintain that the probability of Greece exiting the [European Economic and Monetary Union] is closer to 10 percent and therefore Greek assets are significantly mispriced at current levels,” Perry wrote in an April 23 letter to investors. It said the market was pricing in a more than 60 percent chance of exit.