World Economy

Greek Stocks Plunge Most in Decades

Greek Stocks Plunge Most  in DecadesGreek Stocks Plunge Most  in Decades

Greece’s stock market reopened after five weeks to the most savage wave of selling in decades, underlining a crisis that has crippled the economy and pushed the country’s euro membership to the brink.

Banks led the plunge following the shutdown, which was due to capital controls to prevent the lenders from bleeding more deposits, Bloomberg reported.

Piraeus Bank SA and National Bank of Greece SA sank 30%, the daily maximum allowed by the Athens Stock Exchange. The benchmark ASE Index dropped 16% in Athens after sliding as much as 23%.

The selloff shows the scale of the crisis still facing Prime Minister Alexis Tsipras as he negotiates a third bailout with creditors after six months that have put unprecedented strain on the Greek economy and its financial system.

Greece suspended all trading at the end of June when the country fell into default on its debt. Capital controls were introduced, including the closure of banks and financial markets, to prevent billions of euros from flooding out of the country. ATM withdrawals were limited to €60 ($66) per day.

The banks reopened on July 20, with some restrictions, after Europe agreed in principle to a new bailout. But the shutdown caused large parts of the economy to seize up.

The extended closure had a devastating effect on Greek factories, where activity slumped to its lowest level on record in July. There was a huge drop in new orders, and many companies were forced to limit operations because they did not have the cash to pay for supplies abroad.

The European Commission expects Greece's economy to shrink by 4% this year. Latest available data show unemployment was 25.6% in June.  Massive cash withdrawals by account holders in the first half of the year and the economy's collapse back into recession have left Greek banks in a dire state.

They are relying on emergency cash from the European Central Bank to stay afloat. Europe's new $96 billion bailout plan includes $26.7 billion to repair the banks' finances.