ATHENS – Facing a growing run on Greek banks amid fears of a government default and Eurozone exit, The Bank of Greece has submitted a request to the European Central Bank for more cash fast.
The ECB has been using its Emergency Liquidity Assistance (ELA) mechanism to keep Greek banks from going under in the face of quiet runs by depositors who this week alone have taken more than 3 billion euros ($3.39 billion) out of their accounts.
Reuters reported that ECB officials on June 18 informed the Eurogroup meeting of Eurozone finance ministers in Luxembourg of their concern over whether Greek banks will be able to open on June 22, the day the European Union has called for an emergency meeting on the growing Greek crisis.
Greeks on June 18 yanked out 1.2 billion euros ($1.35 billion) although there were no lines at banks or at ATMs, just a constant flow of outflows.
That propped up a report from Bank of Greece Governor Yannis Stournaras that the country faces a likely catastrophe unless Prime Minister and Radical Left SYRIZA leader Alexis Tsipras reaches a deal to release a long-delayed 7.2-billion euro ($8.1 billion) installment.
SYRIZA officials rejected the report and the Parliamentary Speaker Zoe Constantopoulou said she wouldn’t even accept it, accusing Stournaras, a former finance minister and technocrat at a respected think tank, of trying to undermine the government.
The flight of deposits from the Greek system has reached 3 billion euros ($3.39 billion) since the start of the week, which means that banks will not be able to respond to their clients’ needs for much longer.
The Bank of Greece (BoG) request came after Greek banks said they were running out of money to keep the system going and serve customers and corporations.
Kathimerini said the BoG has asked for additional funding of 3.5 billion euros ($3.95) to cover them in hopes the quiet bank run will slow, or cease if Tsipras’ government can make a deal with the troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).
On June 18, the heads of Greece’s four biggest banks met with Deputy Prime Minister Yiannis Dragasakis for an update on the course of the negotiations that broke off.
Dragasakis, as did Tsipras, said he was optimistic there would be a deal despite any evidence there is and as the wo sides remain far apart on reforms.