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 Almost a billion dollars worth of deposits was withdrawn on Monday alone.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 There has been a very slow bank run over the last couple of years, during which people have withdrawn roughly a third of all household deposits from Greek banks.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.

 

 

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.  

Need some Econ 101?

Our new Marketplace Crash Course is here to help. Sign-up for free, learn at your own pace.