Thursday, 14 June 2012 - 00:05
Greek Bank Withdrawals Rise Ahead Of Elections
--Greek banks see rising deposit withdrawals
--Rate of deposit withdrawals averaging EUR600 million to EUR900 million per day
--By end of week, banker sees deposit withdrawals reaching up to EUR1.5 billion on Friday
ATHENS--Withdrawals by customers at Greek banks have been rising before Sunday's elections, two banking sources said Wednesday, reflecting growing unease among Greeks ahead of crucial national elections that could determine the country's future in the euro zone.
According to banking industry sources, the rate of withdrawals has been steadily inching upwards day by day approaching the level of deposit flight seen just over a month ago when government coalition talks collapsed in the aftermath of inconclusive May 6 elections that set off a fresh round of jitters and forced new polls later this month.
"There has been a deterioration in the situation in the past few days; I estimate that between 600 million euros [$750 million] and 900 million euros have been leaving the system per day," said a senior banker at one of Greece's leading lenders.
"As we approach the last few days before the elections I expect deposit withdrawals to rise further," he added. "And I wouldn't be surprised if by Friday we saw outflows of EUR1 billion to EUR1.5 billion."
Since the start of Greece's debt crisis in late 2009, Greece's banks have lost about one-third of their deposit base as nervous savers have taken their money out of the banks and either sent it abroad, or else stashed it away for safekeeping.
According to the latest data from the Bank of Greece, Greece's banking system had EUR165.95 billion of deposits at the end of April.
In the past two years, deposit outflows have generally averaged between EUR2 billion and EUR3 billion a month, but have spiked during periods of political uncertainty.
Most recently, depositors withdrew some EUR800 million in a single day following Greece's May elections, which left the country without a stable government, and after coalition talks collapsed, forcing the new polls Sunday.
"There has been an increase in withdrawals," said a second banking industry official. "That there is an increase in depositor unease ahead of the elections is undeniable."
The latest outflow of deposits comes as yet another blow to Greece's increasingly distressed banking sector, which is already reeling from rising bad loans as Greece's economy--now in its fifth year of recession--nosedives, and as fears over an eventual exit from the euro zone shatters consumer confidence.
Faced with Greece's increasingly bleak prospects, Credit Agricole SA (CRARY, ACA.FR) is making contingency plans to abandon its troubled Greek bank in the event of Greece leaving the euro zone, according to a person with direct knowledge of the plans, in the first concrete sign of a foreign company signaling it could walk away from its Greek assets.
The prospect of Credit Agricole abandoning its Emporiki Bank of Greece SA (TEMP.AT) unit offers a window into the kind of chaotic environment that could ensue if Greece were to decide to exit the 17-nation currency bloc, with hoards of foreign investors potentially fleeing the country, rendering a recovery of Greece's economy even more difficult.
Sunday's elections are shaping up to be a de facto referendum on Greece's future with the euro, pitting the radical leftist Syriza party--which opposes the terms of the country's latest bailout--and their conservative rival, New Democracy, which largely supports the bailout program. The latest public opinion polls show the two parties are neck and neck.
With just days to go before the vote, there is also mounting concern that no party will win enough support to form a stable governing coalition--much less win outright--raising the prospect of further elections in a few months' time.
That would further derail efforts to implement the tough reform program Greece has promised in exchange for a EUR173 billion ($216 billion) bailout from the European Union and International Monetary Fund. If that aid program is not implemented, Brussels could pull the plug on aid, effectively pushing Greece out of the common currency.
With those fears weighing, many analysts fear that Greek banks could face an outright run on deposits following the vote Sunday if the elections produce yet another hung parliament or if the anti-bailout Syriza party wins.
According to the senior banker, the current rate of deposit outflows--of EUR1 billion or less per day--remains "manageable" since the banks keep large cash buffers on hand to deal with the withdrawals. But if those outflows were to grow four- or five-fold, Greece would be forced to impose deposit and other capital controls.
Officials from the central bank and the finance ministry could not be reached for comment.
--Noemie Bisserbe in Paris contributed to this report.
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(END) Dow Jones Newswires
June 13, 2012 17:05 ET (21:05 GMT)
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