Greek banks slide towards crisis

Updated May 18, 2012 07:04:00

A new government has been sworn in in Athens but it's only for a month until elections are held. There are fears of a banking crisis as large amounts of money have been withdrawn over the last few days amid the possibility of Greece withdrawing from the euro. And now it looks like a Spanish bank is in trouble too.

Source: AM | Duration: 3min 3sec

Topics: international-financial-crisis, business-economics-and-finance, industry, banking, greece, european-union


PETER CAVE: In Athens a new government has been sworn in, but it's only good for a month.

The interim administration of technocrats may have more to do than they hoped though as the creeping debt crisis is sliding ever closer to a banking disaster that's not limited to Greece.

Europe correspondent Philip Williams.

(Sound of men singing)

PHILIP WILLIAMS: It is a solemn ceremony signifying a new start. But there are no fresh directions for the interim Greek government with a shelf life of just a month. This is a sign of troubled times.

And if you want proof of that you only have to go a few metres form the parliament to the nearest ATM. Greeks have been withdrawing Euros in alarming amounts - at least 700 million in the last 10 days as people fear an exit from the euro could create a banking collapse - a prospect beginning to filter down to the street.

VOX POP 1: Because I don't want to jeopardise my fortune and my years of work.

VOX POP 2: Many people have taken the money that's for sure.

VOX 3: You can hear this thing, it's in the air. They don't know what's going to happen, they have lost the faith into the governments.

PHILIP WILLIAMS: Athens based Writer and journalist Amalia Negreponti has been watching with increasing alarm as the Greek banking system is having the lifeblood sucked from it. So far she's kept her money in the bank but only just.

AMALIA NEGREPONTI: In a strange sort of distorted way I'm still persisting in keeping my money in a Greek bank because in a way it's a case of national pride for me, I mean it's the last of a stage of normality because if this goes I think that then everything else will come toppling down.

PHILIP WILLIAMS: But the Greek banks weren't the only ones under pressure. In Spain the troubled bank called Bankia saw its share price plunge another 25 per cent today. Bankia has seen its value halve in the last two weeks. The Spanish government denied media reports that anxious depositors had withdrawn more than a billion euros from Bankia in the last week.

Alex Potter is a banking analyst for the German bank Beringburg.

ALEX POTTER: Well fundamentally banking is a confidence business and if people lose confidence in the institutions then the whole system fails to function. So for that pretty good reason banks like to keep these things under wraps. Central banks and regulators also like to keep it very quiet.

So for those reasons specifically they tend not to say when there is a bank run going on.

PHILIP WILLIAMS: The uncertainly has also seen Spanish bond rates climb again, nearly double what they were in April. It's not a collapse yet but clearly nervous markets and depositors are very worried and according to the British Prime Minster David Cameron, so they should be.


PHILIP WILLIAMS: While the British leader's opinions may not be appreciated in Berlin and Paris, he says he's got a right to a strident view because what happens in Europe affects Britain.

What is unlikely is that any leader or institution has the answers that can solve the great European debt crisis.

This is Philip Williams in London reporting for AM.