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May 17, 2012 at 05:26 AM
Under a caretaker government that can take no action toward fulfilling Greece’s obligations under the terms of its newest bailout, the country waited as people withdrew savings from banks in fear that a departure from the euro could destroy their savings.
So many people have done so since Monday that on Wednesday the European Central Bank (ECB) cut off funding to four Greek banks that it did not consider solvent, and that action roiled markets—as did ECB President Mario Draghi’s assertion that the central bank would not compromise its principles to keep Athens a part of the joint currency.
Reuters reported Thursday that, although senior judge Panagiotis Pikrammenos was sworn in as interim prime minister on Wednesday, there is not much he can do beyond overseeing the country as it moves toward new elections on June 17. No negotiations are taking place with Greece’s creditors, since none have been authorized for the outgoing cabinet ministers.
Many actions designed to meet bailout guidelines have been suspended, some before the May 6 election that left the country in turmoil, as politicians sought not to further alienate voters, and others since the election because of lack of authority to act.
Yet without those measures proceeding, Greece has no way to satisfy the troika of E.U., ECB and International Monetary Fund (IMF) officials who will decide when—and whether—to release further funding.
And Greece is running out of money. Weak tax collection measures coupled with a bank capitalization plan that is in suspension mean little money is flowing into the country’s coffers—and Greece’s people have been pulling their money out of its banks at such a pace that the ECB rated the four banks it will no longer deal with as negatively capitalized.
The troika has announced that it will not return to Greece until a new government is in place and its ministers have reviewed the country’s finances and taken action on policies.
On Wednesday, Draghi said in a speech that the ECB’s “strong preference” is for Greece to remain in the euro zone, but that it will act to maintain “the integrity of our balance sheet.” The ECB issued a statement that said it would push some Greek banks to seek financing from the Greek central bank rather than the coffers of the ECB. The statement said in part, “Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations.”
