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Greek Debt Crisis

Fears of bank runs on the rise in Greece

Jeremy Hobson May 16, 2012

Jeremy Hobson: A caretaker government has been appointed in Greece after the country’s political parties failed to form a coalition following indecisive elections. There will be new elections on June 17th. But that may not be soon enough to calm fears at Greek banks. Almost a billion dollars worth of deposits was withdrawn on Monday alone.

Reporter John Psarapoulos is with us now from Athens with the latest. Good morning.

John Psarapoulos: Good morning.

Hobson: Well, the term “run on the banks” is not something that we want to throw around lightly, so I want to ask you — what do we really konw about all these banks withdrawals in Greece over the last few days?

Psarapoulos: There are no visible signs of a bank run; you don’t see people queuing up at ATMs. There has been a very slow bank run over the last couple of years, during which people have withdrawn roughly a third of all household deposits from Greek banks. At the same time, there isn’t a sense of panic even though people are in a media environment in which the possibility of a bank of collapse and a return to the drachma is constantly being discussed.

Hobson: Are people feeling that they want to be closer to the euro going forward, or that they want to leave?

Psarapoulos: Greeks have consistently over the last two years been polled as being in favor of the euro. It’s seen as a great achievement for Greece; people are afraid that if we return to the drachma, the devaluation will reduce their savings to almost nothing. And I think finally, if you do declare a default on your creditors, the total debt would in fact multiply, because Greece’s debt is figured in euros and dollars. And if tomorrow, Greece were repaying that in a devalued drachma, it would take Greece forever to pay it off.

Hobson: Reporter John Psarapoulos in Athens. He blogs at TheNewAthenian.com. Thanks John.

Psarapoulos: Thank you for having me.



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