Australia's share market has suffered one of its biggest fall in years, with nearly $40 billion wiped out as Greece inches towards a default on its debt and a potentially catastrophic exit from the euro zone.
The S&P/ASX 200 plunged 2.2 per cent to 5,422.5, its lowest level since January, as the market got caught up in a global sell off stemming from the collapse of debt negotiations between Greece and its European Union and International Monetary Fund creditors.
Greece needs to repay 1.6 billion euros of loans to the IMF by Tuesday to avoid defaulting on its debt.
Investors had widely expected the two sides to do what they have done many times before and strike an 11th-hour deal.
But Greek Prime Minister Alexis Tsipras derailed the talks and stunned Europe by announcing a referendum for July 5 on the creditors' proposed reform package that would see the country cut pensions and raise taxes to pay its debts.
Mr Tsipras's Syriza party is urging citizens to vote against the reform package in a move that could precipitate Greece's departure from the euro zone.
News of the collapse of talks sent a shudder through global markets, with Japan's Nikkei and Hong Kong's Hang Seng both down more than two per cent.
The pain is set to continue once European and US markets open, with Germany's DAX 30 expected to open four per cent lower.
There were few places to hide on Australian market, with the major banks, miners, retailers, healthcare providers and telcos all sharply lower.
Only a small number of companies managed to score gains, most of which were gold miners as traders looked for safe haven assets to avoid the carnage.
IG market strategist Evan Lucas said while the Australian market had little direct exposure to Greece, traders were concerned about what a Greek exit from the euro zone, or Grexit, would mean for other debt-laden EU countries including Italy and Spain.
"There is not much you can point to in terms of how this will end and markets hate uncertainty," he said.
Greece is in the midst of arguably the worst economic crisis experienced by a developed country in modern times.
Its economy has shrunk by about a quarter in a depression that has so far lasted more than six years, while its unemployment rate is hovering above 25 per cent.
But things could get worse.
If the Grexit goes ahead, Greece will need a new currency, which UNSW economist Tim Harcourt says will be worth somewhere between 50 per cent and 60 per cent of the euro.
That would be bad news for savers, including Greek Australians with bank accounts in their homeland.
"Anyone holding euros in cash would immediately be much richer. But those Greek-Australians with euros in an Athens bank account would be badly hurt," he said.
Greece has closed its banks for a week to prevent people withdrawing all of their savings and is limiting ATMs withdrawals to help head off the potential for a collapse of the country's financial system.
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