By Diane Alter, Contributing Writer, Money Morning•
The debt crisis intensified this weekend in Greece. Capital controls were the short-term answer.
Here's a quick rundown of how Greek officials reached that decision:
Friday, Greek Prime Minister Alexi Tsipras called for a referendum on terms of a new bailout deal, asking for an extension of the existing bailout terms.
Saturday night, Greece's parliament backed a plan for a July 5 referendum.
Sunday afternoon, the European Central Bank said it will not increase emergency assistance to Greece.
What all that means is that the debt-ridden Mediterranean country is set to miss a 1.55 billion euro ($1.73 billion) payment due Tuesday to the International Monetary Fund, a key Greek creditor.
It also means that a Greek default on Tuesday makes an exit from the 19-member Eurozone a very likely possibility.
In a move to prevent a countrywide collapse, Greek officials have closed banks in the cash-strapped country this week, with capital controls in place. CNBC reported Monday that banks will open Thursday, July 2. Banks were originally to stay shuttered until July 7.
In a sign of the contagion fears that are already rippling across Europe, Macedonia's central bank ordered all of its banks to pull their deposits from Greece.
Residents have been lining up to withdraw money from cash machines. Many Greeks have been emptying their bank accounts for months.
While the National Bank of Greece (NYSE ADR: NBG) said it is making "huge efforts" to keep cash machines stocked, a maximum daily withdrawal amount is in place.
It is part of the Greece capital controls, declared after a meeting on Sunday with the NBG and the country's financial stability board.
So what are Greece's capital controls?
A Breakdown of the Greece Capital Controls
In short, Greece's capital controls restrict the amount of money people can withdraw from banks.
Here's a deeper look at what these controls actually mean...
The maximum amount that can be withdrawn from any account in one day is 60 euros or roughly $66. That's equivalent to 1,800 euros ($2,003) a month.
Pre-paid cards can be used up to the limit. However, they cannot be replenished and no new cards can be issued.
Banks are closed from June 29 through July 2.
Deposits are fully safeguarded. Greek banks are solvent and have recently successfully passed evaluations by the European Central Bank.
Pension payments are exempt from Greece's banking transactions restrictions. Management at credit institutions will decide how these will be paid.
Electronic transactions within Greece are not affected. All transactions via credit or debit cards, as well as other electronic forms (web banking, phone banking), will be conducted as normal. This includes payments for insurance, car, and health plans.
Interbank payments are permitted, as long as payments are to accounts in Greece.
Foreign visitors and tourists are permitted to make cash withdrawals from ATMs without restrictions, as long as their cards have been issued outside of Greece.
Wages paid electronically to bank accounts aren't affected.
A special Committee to Approve Bank Transactions has been established at the State General Accounting Office in cooperation with the Finance Ministry, the Bank of Greece, the Union of Greek Banks, and the Capital Markets Commission. The committee will deal with applications for vital payments that can't be satisfied through the cash withdrawal limits or by electronic transactions (e.g. payments abroad for health reasons).
For investors, the continued Greek debt crisis is now offering some juicy profit opportunities.
"The last time we saw this crisis-driven setup, savvy investors who followed along had the opportunity to take home returns of at least 245% by jumping a stock that would thrive under the circumstances," said Money Morning Chief Investment Strategist Keith Fitz-Gerald.
