Greece in crisis as new elections loom; President reports bank runs have begun

Europe’s financial crisis lurched into a perilous new phase as dire predictions emerged of a collapse in Greece’s economy, with a run on its banks bringing an inevitable end to its membership of the euro.

As leaders in Athens accepted the need for a new general election to end a national stalemate, the International Monetary Fund said Europe’s leaders should prepare for the possibility of a Greek departure from the single currency.

Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the utmost effort must be made to ensure any Greek exit was orderly. The effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she said.

Raising tensions still further, Germany warned Greek voters that the wrong result in next month’s election will force their country out of the single currency.

Greece’s president warned, perhaps most alarmingly, that its banks risk running out of money, posing a “threat to our national existence”.

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