Last Wednesday, a senior judge was sworn in to act as a caretaker for the Greek government for 30 days while the country figures out what to do next.
Council of State head Panagiotis Pikrammenos, 67, was appointed to head Greece‘s caretaker government for a month.
He has no mandate to make any binding commitments and is just keeping the throne warm until the new election, which is scheduled for June 17. The craziness has caused major international creditors and Greeks themselves to make a run on banks, withdrawing hundreds of millions of Euros from Greek banks since the May 6 election.
About €700 million ($898 million) in deposits have left Greek banks since May 7, the day after the election, President Karolos Papoulias told party leaders after being briefed by central bank governor George Provopoulos. “The situation in the banks is very difficult,” Papoulias said according to a transcript of the meeting’s minutes released Tuesday night. “Mr. Provopoulos told me that of course there is no panic, but there is great fear which could turn into panic.”
It’s not like people are standing in lines at banks in Athens, but Greeks have been gradually withdrawing their savings over the past two years as the country’s financial crisis deepened, and either sending the money abroad or keeping it in their mattresses.
The May 6 election made it clear that the majority of Greeks refuse any and all austerity deals and would rather exit the Eurozone and revert to the Drachma.
Greece is being kept afloat by bailout loans from other Eurozone countries and the International Monetary Fund, and losing them would lead to state coffers running out of money, including reserves for pensions, health care and salaries. No one knows how the June elections will affect the payment of these obligations. Try to imagine being in that situation.
The Germans are hoping beyond hope that cooler heads prevail in June, but the evidence seems to be mounting that the left has most of the Greek voter sentiment, and all of the economic analysts’ reports encouraging Greece to exit the Euro is not helping. Germany and the rest of Europe will be caught holding a heavy bag and 50% of the unemployed and over-educated Greek youth will be on their way to England or Germany seeking jobs and welfare.
The stage is clearly set for a default and a disorderly exit and return to the Drachma. Then, the road may be cleared for a return to economic stability and growth, but the resulting government will definitely have a mandate to implement a socialist agenda.
Investors will undoubtedly conclude that Italy, Spain, Portugal and Ireland will follow Greece’s lead (why not?) and should begin a rapid and massive withdrawal of deposits from European banks. Otherwise known as a bank run. What will the U.S. banks do in response, or in anticipation of the inevitable?
Stay tuned. It WILL be entertaining.