NEWS, 14.06.2012.

Greeks pull cash from banks before election

 

Greeks pulled their cash out of the banks and stocked up with food ahead of a cliffhanger election on Monday (NZ time) that many citizens fear will result in the country being forced out of the euro.Bankers said up to 800 million euros ($US1 billion) were leaving major banks daily and retailers said some of the money was being used to buy pasta and canned goods in case of shortages, as fears of returning to the drachma were fanned by rumours that a radical leftist leader may win the election.The last published opinion polls showed the conservative New Democracy party, which backs the 130-billion-euro ($US160 billion) bailout that is keeping Greece afloat, running neck-and-neck with the leftist SYRIZA party, which wants to cancel the rescue deal.As the election approaches, publishing polls is now legally banned and in the ensuing information vacuum, party officials have been leaking contradictory "secret polls".Yesterday, one rumour making the rounds was that SYRIZA was leading by a wide margin."This is nonsense," one reputable Greek pollster said, on condition of anonymity. "Our polls show the picture has not changed much since the last polls were published. Parties may be leaking these numbers on purpose to boost their standing."The pollster said there was some consolidation, with voters turning to New Democracy and SYRIZA from smaller parties but the pool of undecided voters remained unusually large so close to the election and the result was impossible to predict.Both parties say they want Greece to remain in the single currency but SYRIZA has pledged to scrap the bailout agreement signed in March which has imposed some of the toughest austerity measures seen in Europe in decades.The European Union and International Monetary Fund have warned that Greece, which has only enough cash to last for a few weeks, must stick to the conditions of the bailout deal or risk seeing funds cut off.Euro or drachma dilemma New Democracy has been telling voters they must choose between the euro or the drachma, while SYRIZA promises to end the austerity measures imposed by Greece's international lenders, such as salary and pension cuts, that have driven many Greeks into poverty.Fears that Greece will collapse financially and leave the euro have slowly drained Greek banks over the last two years. Central bank figures show that deposits shrank by about 17%, or 35.4 billion euros ($US44.4 billion) in 2011 and stood at 165.9 billion euros ($US208.1 billion) at end-April.Bankers said the pace was picking up ahead of the vote, with combined daily deposit outflows from the major banks at 500-800 million euros ($US625 million to $US1 billion) over the past few days, and 10-30 million euros ($US12-36 million) at smaller banks."This includes cash withdrawals, wire transfers and investments into money market funds, German Bunds, US Treasuries and EIB bonds," said one banker, who spoke on condition of anonymity.Retailers said consumers were stocking up on non-perishable food while almost all other goods were seeing a huge drop in sales as cash-strapped Greeks have no money to spare in the country's fifth year of recession."People are terrified by the prospect of returning to the drachma and some believe it's good to fill their cupboard with food products," said Vassilis Korkidis, head of the ESEE retail federation."It's over the top, we must not panic. Filling the cupboard with food doesn't mean we will escape the crisis," he said.Supermarkets said they did not see a rise in profits as people spend less money. But sales of staples like pasta have gone up.A generation that suffered the deprivations of the Nazi occupation of Greece has traditionally raided supermarkets ahead of any impeding crisis, for fear people will go hungry. Their children have picked up the habit and are stocking up on basics."It's fear that is motivating people," said Anastassia Tzorbatzidou, mother of three, who says she has her shelves full. "When you have kids, it's better to have something."

Italy, France find common ground on crisis

 

The Italian and French leaders on Thursday found common ground on how to confront Europe's worsening debt crisis, emphasizing that budget discipline should not come at the expense of economic growth and calling for a region-wide move to boost market confidence.The leaders held their first bilateral meeting since President Francois Hollande took office last month as Italy's borrowing costs skyrocketed on concerns the country may be the next, after Spain, to need financial aid.The positions outlined by Italian Premier Mario Monti and Hollande, however, were at odds with those espoused by Chancellor Angela Merkel.Europe's crisis response `'has not been enough to protect the euro from market turbulence," Monti said. "We need to reinforce the weak points of the system" in both the real economy and finance. The two leaders agreed that focusing on growth does not mean abandoning budgetary discipline.`'But public account discipline is not enough to have growth, foster development and create jobs," Monti said.The two men also discussed launching eurobonds, jointly issued bonds that would spread debt risk that both support. Germany opposes the bonds out of concern they will lead to fiscal laxity.Monti pointedly noted that Italy and France have together contributed 40 percent of the eurozone's bailout funds to date, staking a claim for the legitimacy of their views.The need for action to boost market confidence in the euro was evident in the bond market movements on Thursday.Italy paid 5.3 percent to raise (EURO)3 billion ($3.76 billion) in three-year bonds from financial markets, up from 3.91 percent last month and the highest level since December.The high rate underscores how investors are increasingly worried Italy will be destabilized by market turmoil in Spain and might run into trouble servicing its debt as it wallows in a deep recession. Political wrangling over reforms has also raised questions over the government's ability to overhaul the economy.To boost confidence in the euro, Hollande said a solution must be forged not just between France and Italy, but with other countries ahead of a European summit on June 28."Growth is the first thing, the second is stability ... the third point is deepening euro monetary union," Hollande said.Monti's technocratic government came to power in November with broad, bipartisan support from political parties to reform the economy. However, lawmakers have in recent weeks shown signs of returning to the old Italian ways of political jockeying. Lobbies and some parties have pushed to water down some reforms.The lower house of Parliament passed a package of anti-corruption measures aimed at making Italy a more just society  something that Monti, a former EU competition commissioner, believes will help encourage more risk-taking and enterprise-building. After being bruised on labor reforms, Monti's government attached the package to three votes of confidence on the most contentions passages, all of which easily passed lower house votes. Despite the passage, there were many calls for changes when the Senate takes up the package  an indication of more political gridlock