Fears grow over Greek banks
A senior judge has been appointed caretaker prime minister of Greece amid anxiety that the unyielding political turmoil in the country could prompt a run on its banks.
Panayiotis Pikrammenos will lead an interim administration until a second general election, on June 17th, as Greek leaders seek to break the political stalemate after the first election 11 days ago.
The failure to form a government has led to concerns the country might leave the euro if Greeks elect leaders opposed to its EU-IMF bailout deal. Europe has warned that any refusal to execute the plan would trigger a withdrawal of emergency aid.
“We believe that is important, not only for the credibility of Greece but for the credibility of the euro area, to stick by the programme,” European Commission chief José Manuel Barroso told reporters in Brussels.
“It will now be for the Greek people to take a fully informed decision on the alternatives, having in mind this will be indeed a historic election.”
The instability in Greece has spooked financial markets. The single currency and European shares dropped to another four-month low yesterday and Spanish and Italian borrowing costs rose.
Although there was no sign of panic or queues yesterday, it emerged that Greeks had withdrawn some €700 million in bank deposits four days ago.
British prime minister David Cameron will today promise to do whatever is needed to protect Britain's economy and banks from a break-up of the euro zone, and will urge leaders of the single currency zone to "sort out its problems".
Mr Cameron's remarks, in a speech to business leaders in northwest England, are likely to irritate European leaders trying to keep the euro zone intact as Greece struggles to cope with its debt crisis.
Britain's Conservative-led coalition has long blamed its own economic woes on the turbulence in Europe, its main trading partner, though critics say Mr Cameron's tough austerity measures have also helped push Britain back into recession this year.
"Either Europe has a committed, stable, successful euro zone with an effective firewall, well capitalised and regulated banks, a system of fiscal burden sharing, and supportive monetary policy - or we are in uncharted territory which carries huge risks for everybody," Mr Cameron will say, according to extracts from his speech released in advance.
"As I have consistently said, it is in Britain's interest for the euro zone to sort out its problems. But be in no doubt: whichever path is chosen, I am prepared to do whatever is necessary to protect this country and secure our economy and financial system."
Greek banks have lost some €72 billion in deposits – about 30 per cent of the total – since 2010, when its debt problems intensified.
The European Central Bank said last night that it has stopped providing funding to some Greek banks. These banks have now moved to a special credit line provided directly by the Greek central bank, a scheme that mirrors emergency lending to stricken Irish banks.
In Frankfurt yesterday, ECB chief Mario Draghi acknowledged the threat to Greece’s membership of the euro. “I want to state that our strong preference is that Greece will continue to stay in the euro area,” Mr Draghi said.