Greece Warns of Possible Default on June 5th; Moodys Warns of a Deposit FreezeBy Michael Snyder Of course it wont technically be a default according to IMF rules for another 30 days after that, but without a doubt news that Greece cannot pay will send shockwaves throughout the financial world. At that point, those holding Greek bonds will start to panic as they realize that they might not get paid as well. All over Europe, there are major banks that are holding large amounts of Greek debt and derivatives that are related to the performance of Greek debt. If something is not done to avert disaster at the last moment, a default by Greece could be the spark that sets off a major European financial crisis this summer. As I discussed the other day, neither the EU nor the IMF have given any money to Greece since August 2014. So now the Greek government is just about out of money, and without any new loans they will not be able to pay back the old loans that are coming due. In fact, things are so bad at this point that the Greek government is openly warning that it will default on June 5th Greece cannot make an upcoming payment to the International Monetary Fund on June 5 unless foreign lenders disburse more aid, a senior ruling party lawmaker said on Wednesday, the latest warning from Athens it is on the verge of default. Prime Minister Alexis Tsiprass leftist government says it hopes to reach a cash-for-reforms deal in days, although European Union and IMF lenders are more pessimistic and say talks are moving too slowly for that. Of course this is all part of a very high stakes chess game. The Greeks believe that the Germans will back down when faced with the prospect of a full blown European financial crisis, and the Germans believe that the Greeks will eventually be feeling so much pain that they will be forced to give in to their demands. So with each day we get closer and closer to the edge, and the Greeks are trying to do their best to let everyone know that they are not bluffing. Just today, a spokesperson for the Greek government came out and declared that unless there is a deal by June 5th, the IMFwont get any money Greek officials now point to a race against the clock to clinch a deal before payments totaling about 1.5 billion euros ($1.7 billion) to the IMF come due next month, starting with a 300 million euro payment on June 5. Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5, Nikos Filis, spokesman for the ruling Syriza partys lawmakers, told ANT1 television. If there is no deal by then that will address the current funding problem, they wont get any money, he said. But the Germans know that the Greeks desperately need more money and cant last much longer. The Greek banking system is so close to collapse that Moodys just downgraded it again and warned thatthere is a high likelihood of an imposition of capital controls and a deposit freeze in the months ahead The outlook for the Greek banking system is negative, primarily reflecting the acute deterioration in Greek banks funding and liquidity, says Moodys Investors Service in a new report published recently. These pressures are unlikely to ease over the next 12-18 months and there is a high likelihood of an imposition of capital controls and a deposit freeze. The new report: Banking System Outlook: Greece, is now available on www.moodys.com. Moodys subscribers can access this report via the link provided at the end of this press release. Moodys notes that significant deposit outflows of more than 30 billion since December 2014 have increased banks dependence on central bank funding. In our view, the banks are likely to remain highly dependent on central bank funding, as ongoing uncertainty regarding Greeces support programme continues to compromise depositors confidence. Unfortunately, when things really start going crazy in Greece people might be faced with much more than just frozen bank accounts. As I wrote about just a few days ago, there is a very strong possibility that we could actually see Cyprus-style wealth confiscation implemented in Greece when the banks collapse. In fact, the Greek government is already talking about the possibilityof a special tax on banking transactions Athens is promoting the idea of a special levy on banking transactions at a rate of 0.1-0.2 percent, while the governments proposal for a two-tier value-added tax depending on whether the payment is in cash or by card has met with strong opposition from the countrys creditors. A senior government official told Kathimerini that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect 300-600 million euros on a yearly basis. Fee wont include ATM withdrawals, transactions up to EU500; in this case Greek govt projects EU300m-EU600m annual revenue from measure. Sadly, most people living in North America (which is most of my audience) does not really care much about what happens on the other side of the world. But they should care. If Greece defaults and the Greek banking system collapses, stocks and bonds will crash all over Europe. Many believe that such a crash can be contained to just Europe, but that is really just wishful thinking. In addition, the euro would plummet dramatically, which would cause substantial financial problems all over the planet. As I recently explained, the euro is headed to parity with the U.S. dollar and then it is going to go below parity. Before it is all said and done, the euro is going to all-time lows. Of course the U.S. dollar is eventually going to totally collapse as well, but that comes later and that is a story for another day. According to the Bank for International Settlements, 74 trillion dollars in derivatives are directly tied to the value of the euro, the value of the U.S. dollar and the value of other global currencies. So if you believe that what is happening in Greece cannot have massive ramifications for the entire global financial system, you are dead wrong. What is happening in Greece is exceedingly important, and it is time for all of us to start paying attention. This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here. 