Greek debt: Fears grow over Greek banks’ health

Greek protester

Capital flight from beleaguered Greek banks this week alone could be more than €4bn (£2.9bn), reports say.

Savers are moving funds as time runs out to resolve Greece’s debt crisis.

The European Central Bank (ECB) has approved more emergency help for the banks and will review funding again on Monday, officials told news agencies.

The amount of extra funding has not been officially disclosed.

The pace of withdrawals has gained speed as talks between the government and its creditors have collapsed.

Greece has less than two weeks remaining to strike a deal or face defaulting on a €1.6bn (£1.1bn) loan repayment due to the International Monetary Fund (IMF).

 

 

If it fails to make the payment, it risks having to leave the eurozone and possibly also the EU.

But the European Commission, the IMF and the ECB are unwilling to unlock bailout funds until Greece agrees to reforms.

They want Greece to implement a series of economic changes in areas such as pensions, VAT and on the budget surplus before releasing €7.2bn of funds, which have been delayed since February.

‘Too little’ progress

On Monday, an emergency summit of leaders from eurozone nations will be held after the latest attempt to resolve the Greek debt crisis failed.

A meeting of eurozone finance ministers on Thursday made no breakthrough.

The head of the Eurogroup of finance ministers, Jeroen Dijsselbloem, said that “too little” progress had been made and that “no agreement as yet is in sight”.

Mr Dijsselbloem stressed that “very little time remains” for Greece.

null

Valdis Dombrovksis, European Commissioner for the euro, told BBC Radio 4’s Today programme that there had been “a strong signal” from the Eurogroup to Greece “that it’s [the] last moment to engage seriously in negotiations”.

Responding to the reports of big cash withdrawals by Greek savers, he said: “It’s very clear that one of the most urgent things Greece needs is financial stability.”

‘Quiet withdrawals’

The Reuters news agency said withdrawals by Greek savers between Monday and Friday reached about €4.2bn, which represents about 3% of household and corporate deposits held by Greek banks at the end of April.

“There are no lines [queues] or panic, it has been a quiet and gradual phase of withdrawals,” one banker told Reuters. “They are due to worries whether a deal will be clinched with the country’s lenders.”

A fully fledged run on the banks could upset the plans of the Greek government and its creditors, says BBC Europe correspondent Chris Morris.

Our correspondent says that any introduction of capital controls will depend on the behaviour of the Greek people.

He says that if the outflow of deposits from banks reaches alarming levels which no-one can really cope with, then the decision is taken out of policymakers’ hands.

[SOURCE; “bbcnews.com”]