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Greek Prime Minister Alexis Tsipras

ATHENS/FRANKFURT. — Greece said it may impose capital controls and keep its banks shut today after creditors refused to extend the country’s bailout and savers queued to withdraw cash, taking Athens’ standoff with the European Union and the International Monetary Fund to a dangerous new level.

Greece’s banks, kept afloat by emergency central bank funding, are on the front line as Athens moves towards defaulting on a 1,6 billion euros payment due to the IMF tomorrow.

The European Central Bank said it would not raise the level of emergency funding, adding to the pressure on Greece’s banks which have been surviving for the past few weeks on frequent incremental increases to the funding lifeline

Amid political drama in Greece, where a clear majority wants to remain inside the euro, the next few days present a major challenge to the integrity of a 16-year-old currency bloc.

“This is a matter that we’ll have to work overnight on with the appropriate authorities both here in Greece and in Frankfurt,” Greece Finance Minister Yanis Varoufakis said of bank closures and capital controls. He was speaking to BBC radio.

The finance ministry later issued a statement saying capital controls were not the government’s preference and were not consistent with monetary union.

Greece’s left-wing Syriza government had been negotiating a deal to release funding in time for its IMF payment. Then suddenly, in the early hours of Saturday, Prime Minister Alexis Tsipras asked for extra time to enable Greeks to vote in a referendum on the terms of the deal.

Creditors flatly turned down this request, leaving little option for Greece but to default, piling further pressure on the banking system. Long lines formed outside many ATMs yesterday in central Athens. The German foreign ministry issued a travel warning advising tourists heading to Greece to take plenty of cash to avoid possible problems with local banks.

The Bank of Greece said it was making “huge efforts” to ensure the machines remained stocked. — Reuters.