As fears of a Greek exit from the Euro zone grow, investors across the country withdrew hundreds of millions of Euros from Greek banks on Monday and Tuesday. As thousands of customers closed accounts, or transferred to euro-friendly banks in neighboring countries like Cyrus, analysts began to fear that a “bank run” was on the horizon. Bank runs take place when large groups of customers withdraw their holdings from banking institutions, fearing that the bank will soon be insolvent. As more people withdraw from the bank, the likelihood of insolvency increases, further increasing the number of customers who withdraw. Essentially, closure transforms from a possibility to self-fulfilling prophecy.
» Attempting to calm “bank run” fears: President Karolos Papoulias announced the staggering total during a speech before heads of Greece’s Panhellenic Socialist party. Papoulias admitted that analysts estimated similarly high withdrawals on Tuesday, but assured party members that there was no need to fear a “bank run”. Analysts seem to agree for now, with Mediobanca analyst Alex Tsirigotis telling Reuters, “We have witnessed periods of tension before when the banks experienced large outflows. In my view, the majority of people with these concerns would have done so by now.” (Photo via dullhunk)
Papademos walks into a tumult: After days of chaotic political wrangling and general panic over Greece’s debt crisis (as well as the euro zone writ large, as Italy teeters on a dire edge), a new Prime Minister has been selected to replace the outgoing George Papandreau. The new man in charge is Lucas Papademos, the former VP of the European Central Bank. “The course will not be easy. But the problems, I’m convinced, will be solved. They will be solved faster, with a smaller cost and in an efficient way, if there is unity, agreement and prudence,” he said. source
Tomorrow’s cover today: our European cover suggests that the markets are not the euro’s only threat. Voters may be too.
Cover of the week. Brilliant execution.
» Harsh words for the opposition: George Papandreou, the leader of the Socialist Party, had this to say towards the opposition New Democrats in the heat of the all-important vote: “All of Europe knows that your party is responsible for the current situation.” The vote, which only one member of parliament on either side crossed lines for, means that the country will receive a $17 billion rescue plan to make it through the Summer, with a second, much larger one in the works. Meanwhile, outside parliament, large-scale protests continued unabated.
» 48-hour general strike called: With Greece facing a difficult austerity vote today, protesters have shown up by the thousands outside of the country’s parliament. The strike has shut down most public services, including transit. Airports and hospitals have also suffered the deep effects of the strikes. The passage of the measures, however, is key — a large loan from the European Union and the International Monetary Fund rests on their passage. If they don’t get it, they risk going into default, which would be very bad.
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