(May 17) Economists warned that the
Greek financial system could crumble within weeks or days unless
the European Central Bank (ECB) steps up support. The euro
fell to a four-month low against the dollar and global stocks
dropped on Tuesday as Greece’s decision to hold new elections added
to uncertainty about its future and a possible exit from the euro
zone.
In an interview with the BBC to be
broadcast on Thursday, Benoît Coeuré, executive director of the
ECB, said: “In the autumn of 2011 the conditions were very
dangerous … European banks were facing severe difficulties to fund
themselves, to access finance, and we were very close to having a
collapse in the banking system in the euro area, which
would have also led to a collapse in the economy and to deflation.
And this is something that the ECB could not accept.” The concern
about the state of the banking system led to €1tn being lent to
banks through three-year loans. Those contingency plans are
now being dusted down amid speculation over a Greek exit, a once
taboo possibility that European leaders have now begun to discuss
openly.
Greek President Karolos Papoulias
told party leaders that banks had lost €700m in withdrawals
alone on Monday and €3bn in 10 days since the election on
May 6 as citizens rush to pre-empt capital controls.
Between January 2010 and March 2012, Greeks have already been
withdrawing their savings from banks at a sharp clip – nearly a
third of bank deposits were withdrawn. The capital of four
Greek banks was so low that they were operating with negative
equity. JP Morgan said Greek banks have already exhausted their
collateral. A refusal by the ECB to ease rules would amount to
expulsion, forcing Greece “to issue its own money.”
The growing alarm comes as
judge Panagiotis Pikrammenos was picked as Greece’s caretaker
leader until the next vote on June 17. While the timing of
any exit is not clear, in their preparations bank banks are
assuming a decision would be made quickly as the country would need
to close down its borders and its banks to stop funds flooding out
of the country.
If Greece is to slide out
of the euro and collapse, how are they going to protect Ireland,
Portugal, Spain and Italy? European leaders who once
denied vociferously that they were fretting over Greece leaving
their currency union have given up pretence. Asked if he was
concerned about a Greek exit, European Central Bank chief Mario
Draghi said simply: “No comment”. German chancellor Merkel
tells Greece to back cuts or face euro exit. International Monetary
Fund (IMF) chief Christine Lagarde warned of “extremely expensive
and hard consequences, and not just for Greece” were Greece to
leave the euro zone, As the nation descended into political
chaos, the fears that Greece’s dire state could drag the euro zone
deeper into crisis rattled financial markets across the globe
are becoming very legitmate now. The IMF’s sister organization, the
World Bank, said the crisis could spread beyond Greek borders to
far bigger euro zone economies that are in trouble.
Sources:
Reuters May 15,
Reuters May 16 10:50am;
Reuters May 16 7:20pm,
The Guardian,
The Telegraph
The Bank of England has
been making contingency plans for the break-up of the euro – saying
the eurozone “storm” is still the main threat to UK
recovery. The eurozone crisis was not the only issue
weighing on the UK economy, with volatile energy and commodity
costs, and the squeeze on household earnings also having an impact.
On May 10, thousands of off-duty police officers took to the
streets in London on Thursday in a rare display of collective anger
against government austerity measures, joining a mass protest by
public sector workers including immigration officials, healthcare
workers and prison officers. The Daily Telegraph reports that David
Cameron is considering extra £25bn of welfare cuts.
Sources: BBC,
National Post,
The Telegraph
What
happens in the eurozone in the coming weeks and months will have a
great impact on the weakened global economy. In order to bring
about one international government, there would have to be a
one-world monetary system. The elite class will push for the
international currency to shore up failing nations, and will be
instrumental in bringing prophecy to bear concerning the mark of
the beast. But some nations will oppose this rule.
