Euro Exchange Rate To Dive As Greeks Rush Banks And Government Says, ‘No Cash’

The euro exchange rate is set to its one of its all-time historic lows against the United States dollar as the possibility of Greece exiting the European Union becomes more and more of a reality.

Meanwhile, Greeks have begun to rush banks in order to withdraw euros while facing growing uncertainty about the future. That fear comes largely from the decision by the European Central Bank to cap emergency relief that has been keeping Greek banks afloat at $89 billion. Estimates suggest that billions have already been withdrawn by the Greek people. In response, the government has now closed banks and limited money transfers for what may be several days this week, reported The New York Times.

Prime Minister Alex Tsipras has now opened up the decision of whether or not Greece will accept the newest deal from the EU to a referendum. On Sunday, Greeks will decide whether or not they want to take the latest deal or exit from the Euro altogether to return to the drachma. Richard Franulovich of Sydney-based financial services company Westpac estimates that this will plunge the euro exchange rate, reported Pound Sterling Live.

“Combined these developments substantially raise Greek tail risks. We expect a very strong risk averse tone to pervade global markets as soon as Asian opens for trading and throughout much of the week… EUR/USD will likely trade down to 1.10 early this week.”

Although some government officials have said that the decision is not one of strictly whether or not to leave the euro, many around the country have begun to see it as the eventual outcome of a vote against the proposed reforms, reported BBC. The euro exchange rate aside, Tsipras has encouraged Greeks to vote against the reforms posed by the the European Union, saying that they were not being properly respected in negotiations, according to The Guardian.

“After five months of hard negotiations our partners, unfortunately, ended up making a proposal that was an ultimatum towards Greek democracy and the Greek people… an ultimatum at odds with the founding principles and values of Europe, the values of our common European construction… [the reforms are] blackmail for the acceptance on our part of severe and humiliating austerity without end and without the prospect of ever prospering socially and economically.”

As of Sunday evening, the euro exchange rate was set at 1.01 euros to the dollar.

[Image via Milos Bicanski/Getty Images]