Greece’s decision to shut banks over the weekend is just the most dramatic element of a crisis that has spiralled out of control. There was always the risk that participants would miscalculate in a fashion that echoes the mistakes of August 1914, with the end result being a ‘worst-case’ outcome.
Overnight indices have moved sharply lower, with the euro selling off as well, while in the bond markets yields on Spanish bonds are rising sharply. Many in the eurozone believe that they have created the necessary firebreaks to stop contagion, but that theory will be sorely tested, perhaps to destruction, in the coming days.
Time has almost run out to keep Greece in the eurozone, but even now it is perhaps unwise not to discount the possibility of an emergency package that will avert disaster. Although this will simply defer the hard questions, having looked over the precipice, eurozone leaders may well blink.
Ahead of the London open, we are calling the FTSE 100 down 150 points, at 6603, following the lead of its peers on the continent.