Greece battens down the hatches as potential default and Grexit loom

AS EU finance ministers prepare to meet on Friday, Greece issued a legislative decree on Monday to tap pockets of cash reserves across the public sector. The money is believed to be needed to pay civil service salaries and pensions this month, plus potentially paying off the next tranche of International Monetary Fund (IMF) loan repayments next month.

In the absence of new loans from its creditors, this latest episode highlights how cash strapped the country has become. In effect, Athens is now engaged in a very high stakes game of poker and it has been reported it has already made plans to potentially nationalise the banking sector and introduce a parallel currency to pay bills in the event its cash reserves are exhausted.

In yet another indicator of the growing concern about the crisis, the European Central Bank's vice-president Vitor Constancio has raised the possibility of the introduction of capital controls to prevent capital flight. Such capital controls were last used in the eurozone in Cyprus as that country underwent its own banking sector problems.