Depositors withdraw funds to stock up on essentials as general election approaches

Greek banks are facing massive withdrawals as depositors fear that the general election, scheduled for Sunday, will lead to a failure in forming a new government and further fears of Greece exiting the eurozone, said a senior banker.

"Radical shifts in Greek politics have led to a surge in outflows and withdrawals from Greek banks. Even if it stabilized at the current level, that would still be high," Michael Massourakis, group chief economist of Alpha Bank, the nation's second-largest bank, told China Daily ahead of the election.

He said Greek banks have lost some 72 billion euros ($90 billion) in deposits, which represents almost 30 percent of the deposit base of the Greek banking system. The outflows accelerated in May as public anxiety deepened after the last election.

"I hope that the result of the elections on Sunday would help decrease the outflows in the subsequent weeks," said Massourakis.

"I believe that the deposit outflows will calm down in the weeks following the election."

He said most of the capital flowing out of Greece now comes from household savers, as most of the "big money" left earlier.

Reuters reported that Greeks pulled their cash out of banks and stocked up on food ahead of a cliffhanger election that many citizens fear will result in the country being forced out of the euro.

It also quoted bankers as saying that up to 800 million euros were leaving major banks daily, and some of the money was being used to buy pasta and canned goods in case of shortages.

Alex Dimitriadis, a Greek who works in an embassy of a northern European country, said: "I know people are getting their money out of the bank. It is not to transfer their money abroad but to hold these euros in their hands: in the closet, deep in the garden or even under the mattress."

Dimitriadis said there were no controls on withdrawals, at least at present.

"There is... plenty of money," Massourakis said, adding that the European Central Bank is providing all necessary liquidity. In the past few weeks, the four major Greek banks have received 18 billion euros from the ECB as prepayments for a future capital increase in Greece.

Further, he said, Greek banks had built up liquidity buffers.

"The situation is manageable. However, people are free to act," said Massourakis.

He said the Greek crisis was really about public finances, and Greek banks were in a "very sound" position at the beginning of the crisis, since Greece had not seen the same bubbles in real estate as in Spain or in Ireland, nor had it been involved with toxic assets.

He said Greek banks do not have large exposure to the markets for financing their activities and were not highly leveraged.

He said when people speak of contagion, they should make no mistake: whatever happens in Spain or Italy, it has nothing to do with Greece.

"I will repeat that. They have their own problems, other issues, like housing, high debt or a banking crisis."

Massourakis said the situation is at arriving at a very critical point in the eurozone, which calls for an "umbrella solution".

He said: "A common solution at the European level is needed. Or we will be faced with a Europe deteriorating across the whole continent."

When asked about the possibility of Greece exiting from the eurozone, Massourakis said: "It is like being pregnant. It is a question of yes or no. My answer is no and it is in nobody's interest."

Tan Xuan contributed to this story.

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