News / Europe

    Fears for European Banks as Greek Depositors Withdraw Money

    Dominic Laurie
    LONDON - The European Central Bank has asked financial institutions across Europe to stand behind their struggling counterparts in Greece, Spain and other countries caught in the euro debt crisis.  Banks have an incentive to support their rivals, but will Europe’s savers be as patient and keep their money where it is? 

    Hundreds of Greek hotel workers are on strike in Athens. They are angry about plans that could cut their wages by up to 40 percent.  Hotel worker Koukos Panagiotis says that Greeks' everyday lives are already chaotic and that these cuts will completely destroy them. He pleads with people to remember that 70 percent of the workers in the tourism sector are working five months per year and have to support their families on that income for the rest of the year.

    Greece is being kept afloat by international loans. In return, Greeks must endure harsh spending cuts and tax increases.  

    If Greeks decide in their June election that austerity is not worth it, the country could be forced to leave the euro.  Savings would then be converted to the old currency, drachmas, very likely worth much less.  

    So some Greeks have been taking their money out of banks, often putting it abroad. About a third of bank deposits have been withdrawn during the past two years.

    Spain also faces a heavy debt burden. There have been noisy protests like in Greece, but here the withdrawal of savings has been less dramatic, less than five percent of deposits during the past year.  

    But if the pace increases, the effect would be amplified because Spain’s banks are so much bigger than Greece’s. Only now, four years into the financial crisis, is Spain starting to come to terms with how weak its banks are. A bank called Bankia asked for a $23 billion bailout last week.

    The Spanish prime minister tried to reassure the markets that everything is stable.  But Bankia’s share price has fallen sharply. Financial analyst Enrique Quemada says there is little trust in the banking system.

    He says that people and investors do not believe Spain will be capable of fulfilling its deficit reduction promises because they have heard Spain say they would hit a budget deficit of six percent, then it was 8.5 percent and then it ended up being 8.9.

    Chris Roebuck, from London’s Cass Business School, says that lack of trust means there could soon come a moment when bank customers in healthier eurozone countries move their funds elsewhere.

    "If they see contagion spreading into panic in those countries, they will be asking themselves, 'Could this get to our country?'  They will ask themselves the question, 'What do I think the risk is?'  And if they think the risk of the whole house of cards coming down is high, they are potentially going to tip from a rational to an emotional response straight away,” said Roebuck.

    Interest rates in the eurozone have hardly ever been lower.  The longer they stay that way, the more savers might decide the meager returns are not worth the risk, and take their money elsewhere.

    You May Like

    Hope Remains for Rio Olympic Games

    Facing a host of problems, Rio prepares for holding the games but experts say some risks, like Zika, may not be as grave as initially thought

    Diplomats Hope to Revive Cradle of Civilization After Defeat of IS

    Diplomats from around globe gather at US State Department, discuss how to rebuild minority communities shattered by Islamic State group

    Women Voters Look Past Gender in Assessing Clinton

    She's the first female presidential nominee, but party identification, other factors outweigh gender

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Uganda Unveils its First Solar-powered Busi
    X
    July 28, 2016 4:16 AM
    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Philadelphia Uses DNC Spotlight to Profile Historic Role in Founding of United States

    The slogan of the Democratic National Convention now underway in Philadelphia is “Let’s Make History Again” which recognizes the role the city played in the foundation of the United States in the 18th century. As VOA’s Kane Farabaugh reports, local institutions are opening their doors in an effort to capitalize on the convention spotlight to draw visitors, and to offer more than just a history lesson.
    Video

    Video A Life of Fighting Back: Hillary Clinton Shatters Glass Ceiling

    Hillary Clinton made history Thursday, overcoming personal and political setbacks to become the first woman to win the presidential nomination of a major U.S. political party. If she wins in November, she will go from “first lady” to U.S. Senator from New York, to Secretary of State, to “Madam President.” Polls show Clinton is both beloved and despised. White House Correspondent Cindy Saine takes a look at the life of the woman both supporters and detractors agree is a fighter for the ages.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video First Time Delegate’s First Day Frustrations

    With thousands of people filling the streets of Philadelphia, Pennsylvania for the 2016 Democratic National Convention, VOA’s Kane Farabaugh narrowed in on one delegate as she made her first trip to a national party convention. It was a day that was anything but routine for this United States military veteran.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.

    Special Report

    Adrift The Invisible African Diaspora