Share prices have slumped across Europe as Greece shuttered its banks and severely limited cash withdrawals ahead of a referendum on 5 July.

The Greek government decided on Sunday night it had no option but to order the country’s banks to remain shut on Monday after the European Central Bank (ECB) froze the liquidity lifeline that has kept them afloat during a six-month run on deposits. The Greek financial stability council recommended banks remain shut until next Tuesday.

As the German chancellor, Angela Merkel, said next Sunday’s vote on whether to accept previous bailout conditions was in effect a decision on whether to stay in the euro, fears of fallout across the continent sent markets tumbling.

In London, the FTSE 100 lost 150 points – more than 2% – when trading began at 8am BST. There were even sharper falls across Europe, with the French and German markets both falling by 4%. European banking shares were the hardest hit, suffering losses of up to 10%.

Overnight in Tokyo, the Nikkei index had fallen almost 3% while in Hong Kong shares slid 2.5%.

The euro fell to its lowest level against the pound in seven and a half years, hitting 0.69855 pence. Oil was also hit, falling by more than a dollar to $62.10 a barrel for Brent crude. But gold, a traditional safe haven in times of trouble, rose by 0.7% to $1,183.

In an emotional appeal aimed directly at the Greek people the president of the European commission, Jean-Claude Juncker, urged a “yes” vote next weekend to what he described as a fair proposal – “not stupid austerity”.

“If they vote yes it will mean that Greece wants to stay with other members of the eurozone,” Junker said.

Using his most heated rhetoric to date in a 45-minute press briefing largely devoted to defending his record in negotiations with Athens, he said: “You shouldn’t commit suicide because you are afraid of death.”

Juncker said he felt “a little betrayed” and accused the Greek government of lying about the proposal on the table. “We really moved mountains until the last minute when the Greek authorities closed the door.”

Some analysts criticised the inflammatory tone, saying it would not help. “Juncker was clearly panic-stricken throughout the press conference because Tsipras has not only wrong-footed them but outmanoeuvred them,” said Alexis Mantheakis, former spokesman of Greece’s rightwing LAOS party.

Recriminations were also flying over the prospect of debt relief for Greece. Juncker insisted an offer of debt relief was on the table, but an EU official clarified this was a question for a future bailout package. A close adviser to Tsipras accused the commission of offering nothing new.

Read more: Shares slide as deepening Greek crisis shakes global markets

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