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Greek Bank Run Raises Likelihood of “Grexident”

Depositors have pulled €800 million out of Greek banks in less than 48 hours, as Athens continued to teeter dangerously close to default less than one week before a critical payment deadline to the International Monetary Fund.

“Embattled Greek banks were hit with more damaging data Friday that showed deposit outflows accelerating at a rapid clip,” The Wall Street Journal reported on Friday. “Deposits at Greek banks are at their lowest level in more than ten years amid broad concerns about the country’s economic prospects that have hammered shares in Greek lenders this year.”

The latest outflows followed a staggering €5 billion that was pulled out of Greek banks in April, leaving deposits at their lowest level in more than a decade and fueling concerns of a bigger bank run.

Household and business deposits declined to around €133 billion in April from €138 billion in March. That put bank deposits more than €100 billion below the pre-recession peak in September 2009.

Greece and its European creditors are still divided on a new bailout agreement, which Athens desperately needs to secure this week in order to meet its payment obligations and remain part of the euro. The outflow of cash over the past two days suggests that the ominous “Grexident” scenario – Greece’s unintentional exit from the Eurozone – was slowly materializing. With both sides still far apart on a deal to break the loan impasse, the IMF has already prepared a contingency plan that includes Greek banks and regional partners.

The international lending institution recently hinted at Greece’s departure from the 19-member currency bloc should negotiations fall apart in June. The IMF has repeatedly said any future agreement with Greece would not include additional bailout funds.

The four-month bailout extension that was negotiated in February expires on June 30. Without a new agreement, Greece will run out a cash, which could be a precursor for exiting the Eurozone. According to the IMF, the real deadline is June 5, when Athens is due to pay back €310 million. Without an agreement by Friday, it is unlikely that Greece would be able to repay the “whale amount” of its loan obligations, the IMF says.

Greece is on the hook for another €348 million payment to the IMF on June 12, followed by €929 million in payments the following week, including an €85 million interest payment to the European Central Bank.

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