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 5:15 PM
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
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 About a third of bank deposits have been withdrawn during the past two years.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

VOA Exclusive: Interview With Myanmar President Thein Sein

Thein Sein calls allegations that minority Muslim Rohingya are fleeing alleged torture in Rakhine state a media fabrication More

Video Better Protective Suit Sought for Ebola Caregivers

Current suit is uncomfortable, requires too many steps for removal, increasing chance of deadly contact with virus More

UN Rights Commission Investigates Eritrea

Three-member commission will start collecting first-hand information from victims and other witnesses in Switzerland and Italy next week More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ebola Economic Toll Stirs W. Africa Food Security Concernsi
X
November 19, 2014 11:39 PM
The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.
Video

Video What Jon Stewart Learned About Iran From 'Rosewater'

Jon Stewart, host of the satirical news program "The Daily Show" talks with Saman Arbabi of Voice of America's Persian service about Stewart's directorial debut, "Rosewater."
Video

Video Lebanese Winemakers Thrive Despite War Next Door

In some of the most volatile parts of Lebanon, where a constant flow of refugees crosses the border from Syria, one industry continues to flourish against the odds. Lebanese winemakers say after surviving a brutal civil war in the 1970s and 80s, they can survive anything. Heather Murdock has more for VOA from the Bekaa Valley in Lebanon.
Video

Video China's Rise Closely Watched

China’s role as APEC host this week allowed a rare opportunity for Beijing to showcase its vision for the global economy and the region. But as China’s stature grows, so have tensions with other countries, including the United States. VOA’s Bill Ide in Beijing reports on how China’s rise as a global power is seen among Chinese and Americans.

All About America

AppleAndroid