Fears Greek turmoil could spark run on 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Although there was no sign of panic or queues yesterday, it emerged that Greeks had withdrawn some €700 million in bank deposits four days ago.

Official records from a political meeting on Monday show Greek president Karolos Papoulias relayed to party chiefs the concerns of the country’s central bank governor George Provopoulos.

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.