Greece says it will consider bank closures and capital controls on Monday

By Andrew Osborn

LONDON (Reuters) - The Greek government will on Sunday night consider imposing capital controls and closing the country's banks on Monday, Finance Minister Yanis Varoufakis said, while asserting the crisis did not mean Athens would have to leave the euro.

Huge pressure has been piling up on Greek banks after talks between Athens and its creditors on a cash-for-reforms deal collapsed. Long lines formed in front of cash machines across the country at the weekend as people rushed to withdraw funds.

The crisis has pushed Europe's grand project to bind its nations into an unbreakable union by means of a common currency into uncharted waters after EU governments refused funding to save Greece from defaulting on its debts.

Varoufakis, asked if capital controls were now inevitable and if the banking system would be shut down on Monday, told BBC radio on Sunday: "This is a matter that we'll have to work overnight on with the appropriate authorities, both here in Greece and in Frankfurt."

Varoufakis said he would be holding talks with the Bank of Greece and the European Central Bank to see "what can be done to minimise the burden on our people from Europe's refusal to grant us basic democratic rights".

He said the crisis and a planned referendum did not mean Greece would necessarily have to leave the euro however, even if Greeks voted to reject the package being offered by creditors.

"It doesn't have to and it shouldn't," he said. "There are no provisions for leaving the euro once in. You can't get out. This is part of the European treaties. Why should we have to consider even getting out of the euro?"

Asked if Greece would meet its commitment to repay the International Monetary Fund, he said it was up to Greece's international lenders to transfer money that Athens itself was owed to cover the debt.

He called the prospect that the ECB could decline to provide further emergency liquidity assistance to Greek banks "appalling" and said it would signal that Europe had failed when it came to both monetary union and democracy.

"It is a dark hour for Europe," he said. "Europe has to face up to the fact that it has lost its way."

The ECB said on Sunday it would keep the ceiling of Emergency Liquidity Assistance to Greek banks, which it has raised several times over the past few weeks as the prospect of a cash-for-reforms deal appeared attainable, at its current level. It said it was working with the Bank of Greece to maintain financial stability.

Bank of Greece Governor Yannis Stournaras said the bank would take all measures necessary to ensure financial stability for Greek citizens in these difficult circumstances".

(Additional reporting by John O'Donnell in Frankfurt; Editing by Kevin Liffey)