BoG head: Greeks returning deposits to banks

Associated Press
Greek presidential guards stand during the changing of the guards ceremony outside the Greek parliament in central Athens, Monday, July 9, 2012. A deputy labor minister has resigned from Greece's new coalition government, saying it should have pressed harder to renegotiate the terms of the country's bailout agreements. Nikos Nikolopoulos announced his resignation Monday, hours after the new conservative-led government won a confidence vote in parliament. (AP Photo/Dimitri Messinis)
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ATHENS, Greece (AP) — Greeks have been returning the savings they took out of the country's banks during the political uncertainty in the past two months, the country's central bank governor said Tuesday as he urged the country's new government to work on boosting confidence in the banking system.

Worried by a political crisis that led to two national elections in the space of six weeks and threatened Greece's membership of Europe's joint currency, Greeks had withdrawn billions of euros from the banks, with deposits falling by €8.6 billion ($10.57 billion) in May to €157.4 billion from €166 billion in April.

Inconclusive elections on May 6 and the collapse of ensuing coalition talks to form a government led to a second election on June 17. Although again no party won enough votes to govern alone, a three-party coalition was formed, with conservative party head Antonis Samaras at its helm as prime minister.

"Banks lost deposits because of the uncertainty, but fortunately after the elections we have a return of deposits, at quite satisfactory rates, I'd say, and I hope that in the following months ... we will manage to have the rest of the deposits returned," Bank of Greece Governor Giorgos Provopoulos said during a meeting with the country's president, Karolos Papoulias. "That would be a big success."

Greece's new government now faces the difficult task of getting its debt-cutting program back on track, after delays to economic reforms were exacerbated by the election period. The country has pledged to take a series of austerity measures in return for billions of euros in rescue loans from other eurozone countries and the International Monetary Fund, but has come under intense criticism for falling behind on the promised changes.

The three parties that make up the new government had said they would seek amendments to the reform program, arguing that the measures — which have included slashing pensions and salaries and increasing taxes across the board — have taken a huge toll on the economy and left the country in a deep recession, which is in its fifth year. Unemployment has spiraled to above 22 percent.

The finance ministers for the 17 countries that use the euro met in Brussels Monday night, and said the final decision on Greece's request to renegotiate the terms of its bailout agreements will depend on the conclusions of the debt inspectors from the IMF, European Central Bank and European Commission, known as the "troika," who are overseeing the Greek reforms.

"Final decisions can only be made when the facts and figures from the troika are on the table, but in general it is clear that they will stick to the program that Greece is now undergoing," Austrian Finance Minister Maria Fekter said.

The report is expected to be completed towards the end of July, and the issue to be discussed at another finance ministers' meeting in September, Greece's new finance minister, Yannis Stournaras, said.

Stournaras noted that measures worth about €3 billion which had been pledged in March must be taken in the coming weeks, and that discussions on what they would be were continuing, with Greece hoping to be able to apply the measures in instalments. The measures include privatizations, he said in comments to reporters in Brussels.

Greece's reform program has suffered "significant delays," the minister said, according to comments released by his office. He said no request was made for Greece to be given more time to apply its cost-cutting reforms.

Separately, Greece raised €1.625 billion ($2 billion) in a 26-week treasury bill auction that saw the interest rate ease marginally compared to a similar sale last month, the country's Public Debt Management Agency said. Tuesday's sale produced an interest rate of 4.70 percent, slightly down from 4.73 percent in June. Demand was also slightly up, with Tuesday's auction 2.16 times oversubscribed, compared to 2.14 times last month. Greece had originally been seeking to raise €1.25 billion in the sale.

Greece has been locked out of the international borrowing markets by exceedingly high interest rates reflecting investors' lack of confidence in its long-term bonds, but has continued issuing treasury bills as a means of maintaining market presence.

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