The newly elected French president, Francois Hollande, met with Chancellor Angela Merkel of Germany to discuss the possibility of growth measures as they sought a way out of the Greek debt debacle. Markets reacted to the failure of Athens to form a government amid open discussion of the possibility that the country may depart the euro.
Bloomberg reported Wednesday that Hollande’s first meeting with Merkel resulted in a declaration that growth measures would be considered for Greece as long as that country remained committed to the austerity measures that are a condition for its second bailout.
“I’ll respect the vote of the Greeks whatever it is,” Hollande was quoted saying. “Yet my responsibility is to give Greece a signal. I see the suffering and challenges that the Greeks feel. The Greeks need to know we’ll come with growth measures that will allow them to stay in the euro zone.”
Merkel has been adamantly opposed to any leeway in austerity, while Hollande won the French presidency on a platform of growth in addition to austerity. She took care to bring up the fact that Greece and its creditors had agreed on the bailout program, and that it “has to be adhered to.”
The likelihood of Greece honoring those austerity requirements has been diminishing by the day, as first voters punished the parties that had accepted them and now anti-austerity parties look poised to win new elections that could be called as early as June 10 but could be set instead for June 17.
After talks failed on Tuesday to produce a new government, President Karolos Papoulias of Greece was scheduled to meet with party leaders on Wednesday to discuss forming a caretaker government. The BBC reported that Papoulias was expected to name a senior judge to preside over the running of the country until new elections are held.
Markets took a dim view of the proceedings, with the euro and stocks from Europe to Asia falling on concerns that the situation would end badly. Greek citizens, also anticipating problems, withdrew near-record amounts of euros from the country’s banks—something they also did prior to the country’s first bailout.
Bloomberg reported that the head of Greece’s central bank, George Provopoulos, said that at least at least 700 million euros ($894 million) were pulled from banks on Monday. The report said that according to two banks, Tuesday’s withdrawals ran at about the same pace.
According to the minutes of a meeting with political leaders on Tuesday, Papoulias told them about the withdrawals. He was quoted saying, “Mr Provopoulos told me there was no panic, but there was great fear that could develop into a panic.”