Greece’s banks continue to haemorrhage deposits as the population tries to protect itself from a possible exit from the Eurozone.
Figures released Friday by the European Central Bank showed that another €5.6 billion in deposits left the banking system in April, and means that €32 billion–almost 20% of total deposits in the system–has been pulled since November, when former Prime Minister Antonis Samaras triggered the latest chapter of Greece’s crisis by calling new elections.
Those elections ushered in a government led by the radical left-wing Syriza party, on a platform that promised Greeks an end to austerity without losing the euro. The country’s creditors in the Eurozone and International Monetary Fund have repeatedly refused to go along with that, with the result that the country is now running out of money fast.
Greece’s government has claimed regularly this week that it will reach a deal with its creditors to unlock at least some of the remaining €7.2 billion ($8 billion) in its bailout program by Sunday, but there’s no indication of that from the creditors.
IMF managing director Christine Lagarde acknowledged for the first time Thursday that a “Grexit” scenario, as financial markets call the possibility of default and exit from the Eurozone, is “possible”, while German Finance Minister Wolfgang Schäuble said earlier this week he’s “always a bit surprised” to hear that a deal is near.
“It’s very unlikely that we’ll get a comprehensive solution in the next days,” Lagarde told the Frankfurter Allgemeine Zeitung on the sidelines of a meeting of G7 finance ministers and central bank chiefs in Dresden, Germany.
Greece has to pay the IMF some €1.5 billion in four instalments in June, and senior ministers have said it won’t be able to pay.
Whether that threat is real, or just a cry of ‘wolf’ will become clear on June 5, when the first instalment of €306 million is due.
The latest figures beg the question how long the European Central Bank, which supervises Greece’s banks as well as being their lender of last resort, will continue to prop them up. Unable to access capital markets, the banks have plugged the widening hole in their balance sheets with emergency loans from the ECB.
But the ECB refused to raise the ceiling for such assistance from its current level of €80.2 billion this week, a curious action given that the pressure of deposit outflows appears to be increasing. A spokesman for the ECB declined to comment on the decision.
If the ECB continues to refuse to up the limit, then sooner or later banks will be unable to honor requests for withdrawals in full. Many economists see that moment as the likeliest trigger point for the introduction of capital controls. While that would likely cause havoc in Greece, in wouldn’t by itself force the country out of the Eurozone. It would, however, force the government and its creditors to end their five-month stand-off–one way or the other.
