Greeks pulling euros out of banks

Greeks pulling euros out of banks

Greeks are voting with their wallets and pulling euros out of the banks in fear that their country may leave the European single currency despite the declared determination of EU powers Germany and France to keep Athens in the monetary union.

As financial markets shuddered over the deepening turmoil in Athens on Wednesday, a chorus of skeptical politicians and central bankers from London to Ottawa predicted the euro zone could fall apart soon unless European governments act more decisively to save the currency.

“It either has to make up or it is looking at a potential break-up,” British Prime Minister David Cameron told parliament in London. “That is the choice they have to make, and it is a choice they cannot long put off. Greek President Karolos Papoulias warned political leaders that citizens were withdrawing their money due to “great fear that could develop into panic” at the risk of a debt default and exit from the euro area, according to minutes of their meetings posted on the presidency's website.

Investors fled to the US dollar and safe-haven German bonds while the euro lost almost a cent to fall to a four-month low below $1.27. Spanish and Italian bond yields spiked while a key index of European shares fell to its lowest level this year.

German Chancellor Angela Merkel and new French President Francois Hollande sought to quell talk of a possible Greek departure from the euro zone after their first meeting on Tuesday evening, which focused on ways out of the 17-nation currency area's debt crisis.
“We agreed that we want Greece to stay in the euro,” Merkel told a joint news conference in Berlin.

Nearly two thirds of Greeks voted on May 6 for parties of the radical left and far right which oppose the terms of the EU/IMF assistance program, which has imposed steep wage and pension cuts, deepening a four-year recession. European Commission chief Jose Manuel Barroso said the Greek people must now make a fully informed decision understanding the consequences for their country's future. But many Greek voters believe they can stay in the euro without abiding by the conditions imposed to obtain the bailouts.

IMF chief Christine Lagarde said, on Tuesday, that Greece would either have to be given more time and money to meet its debt reduction targets or else euro zone countries would have to begin planning for its exit.

Spanish Prime Minister Mariano Rajoy voiced the alarm of a country that could be next in the firing line if Greece left. “I don’t want Greece to exit the euro,” he told parliament in Madrid.

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