The European Union (EU) gave formal approval to Greece's imposition of capital controls in it's troubled country on Monday, after an immediate, preliminary assessment by the European Commission, saying Greece's decision was justified.

The central Bank of Greece Sunday evening recommended a a bank holiday and the imposition of capital controls as from Monday in response to widespread withdrawals of money from its banks by Greek citizens over the week-end after negotiations between international lenders and Greece soured.

"Under the current circumstances, the stability of the financial and banking system in Greece constitutes a matter of overriding public interest and public policy that would appear to justify the imposition of temporary restrictions on capital flows," Financial Services Commissioner Jonathan Hill said in a statement.

"Maintaining financial stability is the main and immediate challenge for the country," he stressed.

Meanwhile, he said the capital controls must be applied for the shortest possible period. "While the imposed restrictive measures appear necessary and proportionate at this time, the free movement of capital will, however, need to be reinstated as soon as possible in the interest of the Greek economy, the eurozone, and the European Union's single market as a whole."

After the collapse of five month reform-for-cash negotiations with international lenders, the Greek government called on voters to accept or reject the draft deal tabled by lenders on June 25.

The move triggered a series of reactions starting with the Eurogroup rejecting Greece's request for a loan extension to hold a referendum.

Without an agreement on June 30, Greece was unlikely to make the delayed loan installment to the International Monetary Fund causing Greeks to withdraw money from banks.

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