Thu, May 17, 2012 - Page 6 News List

Greeks pull out funds amid euro exit fears

BANK RUN?Withdrawals on Monday alone reached at least 700 million euros, as warring parties failed to form a viable coalition, triggering new elections


A woman walks by two beggars outside the central bank of Greece in Athens yesterday.

Photo: Reuters

Greek President Karolos Papoulias spoke of “fear that could develop into panic” at the country’s banks in the weeks before fresh elections that could precipitate Athens exit from the euro zone.

Greeks are withdrawing euros, afraid of the prospect of rapid devaluation if the country leaves the single currency, minutes of Papoulias’ meetings with political leaders showed. Greece’s warring parties have refused to form a viable coalition, triggering new elections, set for June 17, that could strengthen the hand of opponents of the nation’s EU bailout.

Central bank Governor George Provopoulos said savers withdrew at least 700 million euros (US$894 million) on Monday, the president told party chiefs.

“Mr Provopoulos told me there was no panic, but there was great fear that could develop into a panic,” the minutes quoted the president as saying.

“Withdrawals and outflows by 4pm when I called him exceeded 600 million euros and reached 700 million euros,” he said. “He expects total outflows of about 800 million euros, including conversions in German Bunds and other such things.”

Sources at two Greek banks told Reuters that withdrawals on Tuesday had taken place at about the same rate as on Monday and the president’s numbers appeared to be broadly accurate.

Greeks have been withdrawing funds from banks for years, and there has so far been no sign of lines at banks in Athens, but withdrawals at such a pace in two days are unusual.

A senior bank executive said there had been withdrawals, but there was no sign of a panic, such as in April 2010, when 8 billion euros were withdrawn just before Greece obtained its first bailout.

According to central bank figures, Greek businesses and households had 165 billion euros on deposit at the end of March, having withdrawn 72 billion euros since January 2010.

Experts say some of that was due to capital flight and some due to Greeks eating into their savings because of the crisis.

Opinion polls show that voters enraged over five years of recession, record unemployment and steep wage cuts are likely to elect a parliament as fragmented as the one they chose on May 6. However, the vote, probably in the middle of next month, may well tip the balance of power toward leftist parties opposed to the bailout conditions.

Policymakers from EU states and the European Central Bank have warned that they would stop sending Athens the cash it needs to stay afloat if a new government tears up the bailout.

Many Greek voters still hope they can stay in the euro without abiding by the conditions imposed to obtain the bailouts, as promised by Alexis Tsipras, the charismatic 37-year-old leader of the surging leftist SYRIZA party.

“There is a bit of schizophrenia in our society right now. People want to stay in Europe — have the cake — but they also want to eat it —by attacking the creditors,” Theodore Couloumbis at Athens-based think tank ELIAMEP said.

“Much depends on whether the Greek people in this repeat election are going to vote with anger and passion or if they will cool off, reflect and see in effect what the real choices are. The choice is between bad and worse,” he said.

Party leaders were to meet Papoulias at 1pm to put together a caretaker government. It was not clear who would be part of that emergency Cabinet, whose main task would be to organize the repeat election — the third in Greece in as many years.

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