Mere days before Greeks head to the polls for the second time in as many months to elect a parliament, savers are pulling their money out of banks en masse in anticipation of an exit from the eurozone.
CNBC reports that some €800 million is leaving Greek banks on a daily basis. Similar amounts were pouring out of the banks in May when the last attempt to form a government failed. Coalition talks collapsed at the time because none but the main conservative and socialist parties, which have ruled Greece in alternation since democracy was restored in 1974, wanted to stick with austerity.
Opinion polls suggest that the far-left Syriza party could win this Sunday’s parliamentary vote. It has promised to tear up the conditions of Greece’s two international bailout agreements.
Syriza’s leader, Alexis Tsipras, said last week that if he wins the election, he will not fire any civil servants, scrapping the current pledge to cut 150,000 public-sector jobs by 2015. His party also seeks to nationalize instead of privatize companies and wants to expand instead of cut public spending to stimulate the economy. Such policies of economic nationalism and stimulus directly contradict Greece’s commitments under the €130 billion bailout agreement that was signed in February.
Tsipras believes that European leaders are bluffing when they warn that unless Greece respects the terms of the bailout, there will be no further financial support for the country which could push it into bankruptcy in a matter of days or weeks.
Even if the traditional conservative and socialist ruling parties manage to win a majority however, Greece’s future looks grim.
German newspaper Die Zeit reported on Wednesday that Greece could require a third bailout package as early as this summer. “If a state insolvency is to be avoided, then the Europeans will need to jump in again.” The German parliament is supposed to be already contemplating such a program which would be conditioned on deeper austerity measures which the Greek people are highly unlikely to tolerate.
The Greek capital flight, which will probably accelerate if Syriza wins the election on Sunday and subsequently fails to put together a government, puts mounting pressure on the Bundesbank because it has to effectively loan to Greek banks if Greek savers transfer their money to German accounts.
Already, Greek banks “owe” the Germans more than €100 billion. The question soon becomes how much longer the German central bank will — and can — continue to bankroll the Greek banking system once a eurozone exit appears inevitable?
A vast majority of Greek voters as well as the Syriza party wants to stay in the euro but if they don’t submit to the terms that Germany has applied to membership anymore, Berlin can’t keep them in without losing its credibility and risking what it has so long feared — a “transfer union” that sees a permanent flow of funds southward at German taxpayers’ expense.