News / Europe

Fears for European Banks as Greek Depositors Withdraw Money

Fears for European Banks as Depositors Withdraw Moneyi
|| 0:00:00
X
May 31, 2012
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? VOA's Dominic Laurie reports.

Fears for European Banks as Depositors Withdraw Money

TEXT SIZE - +
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 About a third of bank deposits have been withdrawn during the past two years.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

Photogallery Pope's Easter Prayer: Peace in Ukraine, Syria

Pontiff also calls for end to terrorist acts in Nigeria, violence in Iraq, and success in peace talks between Israelis and Palestinians More

Abdullah Holds Lead in Afghan Presidential Election

Country's Election Commission says that with half of the ballots counted, former FM remains in the lead with 44 percent of the vote More

Russia-Ukraine Crisis Could Trigger Cyber War

As tensions between Kyiv and Moscow escalate, so too has frequency of online attacks targeting government, news and financial sites More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine, Russia, United in Faith, Divided in Politicsi
X
Michael Eckels
April 19, 2014
There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Ukraine, Russia, United in Faith, Divided in Politics

There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Face of American Farmer is Changing

The average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population. It’s a troubling trend signaling big changes ahead for American agriculture as aging farmers retire. Reporter Mike Osborne says a new report from the U.S. Census Bureau is suggesting what some of those changes might look like... and why they might not be so troubling.
Video

Video Donetsk Governor: Ukraine Military Assault 'Delicate But Necessary'

Around a dozen state buildings in eastern Ukraine remain in the hands of pro-Russian protesters who are demanding a referendum on self-rule. The governor of the whole Donetsk region is among those forced out by the protesters. He spoke to VOA's Henry Ridgwell from his temporary new office in Donetsk city.
Video

Video Drones May Soon Send Data From High Seas

Drones are usually associated with unmanned flying vehicles, but autonomous watercraft are also becoming useful tools for jobs ranging from scientific exploration to law enforcement to searching for a missing airliner in the Indian Ocean. VOA’s George Putic reports on sea-faring drones.
Video

Video New Earth-Size Planet Found

Not too big, not too small. Not too hot, not too cold. A newly discovered planet looks just right for life as we know it, according to an international group of astronomers. VOA’s Steve Baragona has more.
Video

Video Copts in Diaspora Worry About Future in Egypt

Around 10 percent of Egypt’s population belong to the Coptic faith, making them the largest Christian minority in the Middle East. But they have become targets of violence since the revolution three years ago. With elections scheduled for May and the struggle between the Egyptian military and Islamists continuing, many Copts abroad are deeply worried about the future of their ancient church. VOA religion correspondent Jerome Socolovsky visited a Coptic church outside Washington DC.
Video

Video Critics Say Venezuelan Protests Test Limits of Military's Support

During the two months of deadly anti-government protests that have rocked the oil-rich nation of Venezuela, President Nicolas Maduro has accused the opposition of trying to initiate a coup. Though a small number of military officers have been arrested for allegedly plotting against the government, VOA’s Brian Padden reports the leadership of the armed forces continues to support the president, at least for now.
Video

Video More Millenials Unplug to Embrace Board Games

A big new trend in the U.S. toy industry has more consumers switching off their high-tech gadgets to play with classic toys, like board games. This is especially true among the so-called millenial generation - those born in the 1980's and 90's. Elizabeth Lee has more from an unusual café in Los Angeles, where the new trend is popular and business is booming.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
AppleAndroid