GREEK POLICE ARE URGING CITIZENS TO KEEP THEIR MONEY IN THE BANK
Police urge Greeks to keep money in bank
Scale of withdrawals from Greek banks has led to speculation that eurozone-wide guarantee is need to maintain confidence
guardian.co.uk, Thursday 24 May 2012 19.40 BST
Police are urging Greeks to keep their money in bank accounts rather than putting it at risk of theft, amid further uncertainty about whether the austerity-struck country will remain in the eurozone.
Greece’s banks are likely to be shored up on Friday or Monday with €18bn (£14bn) of bailout funds they have been due to receive for weeks but which were held up by political uncertainty caused by inconclusive elections. Greece goes to the polls again on June 17, further stoking fears about its future within the euro.
The scale of withdrawals from Greek banks – almost 25% of deposits have been taken out in the past two years – and fears that other countries may suffer mass withdrawals has led to speculation that a eurozone-wide guarantee is needed to maintain confidence in the banking system.
Greece’s national police spokesman, Thanassis Kokkalakis, told Reuters: “Many people have withdrawn their money from the banks fearing a financial crash, and they either carry it on them, find a hideout at home or in storage rooms.
“We urge people to trust the banking system, leave their money there, or at least in a safe place, not hide it at home, where they must anyway take the basic security measures.”
The injection of fresh funds into the Greek banks is expected to allow the European Central Bank to start dealing with those unnamed institutions to which it stopped providing direct funding because they did not have enough capital.
Deposits in other eurozone countries are holding up, with those in Spain and Italy down only 3% and 2% respectively.
The Spanish government is propping up its banks, putting €9bn into Bankia, the fourth largest bank, and bringing in independent valuators – including US management consultants Oliver Wyman – for the property loans sitting inside Spain’s banks. Spain already had a restructuring fund for its banks – known as FROB – which will provide the resources for the recapitalisation of Bankia.
Savings across the EU – including in Britain – are guaranteed up to €100,000 by national banking systems, which should prevent the need for any deposits to be withdrawn. There are suggestions that this burden should be shared across the eurozone.
Simon Ward, chief executive at global investment management group Henderson, pointed out that sharing out the bill might prove politically difficult.
“Germany would end up bearing the risk and I don’t think that’s politically acceptable,” he said.
The ECB, Ward said, could do more to restore confidence in the stalling eurozone economies by embarking on quantitative easing. “We need to move to full QE that would stabilise the economies … boost confidence and slow the deposit flight. But we might not have time for that.”