Papademos’ Comment “Greek Euro Exit Risk is Real” Bring European Stocks to Fall

Posted by in Economy

I am afraid, in the five months he was prime minister of Greece, Lucas Papademos learned very quickly the lesson of  local politics: spreading fear, triggering turbulence. On Wednesday, European stocks  dropped at the opening, after Papademos said to Wall Street Journal on Tuesday that ” preparations for an exit from the euro zone are being considered.”  Later he clarified his comments with an interview to CNBC. But the damage was done.

In his interview to CNBC, Papademos said that there are no preparations underway in Greece for a possible euro exit. However, he added that he “cannot exclude  the possibility” that countries are making preparations due to increased fear of such an event.

“At the same time, news reports quoted former Greece Prime Minister Lucas Papademos as saying that preparations for the country’s exit from the euro zone are being considered.

Papademos said such a move was unlikely to materialize but the risk is real.” (CNBC)

As a euro exit can be initiated only by Greece, Papademos may explain to us who and why is making such preparations…. As a former banker, he must have his connections and gather some information on the issue, right?

Former Greek Prime Minister Lucas Papademos says there are no preparations underway in Greece for possibly exiting the Euro.

In a brief conversation with CNBC, he also said he is not aware of any specific preparations in European institutions or other European countries.

However, he “cannot exclude the possibility” that countries are making preparations due to increased fear of such an event, driven by the country`s inconclusive elections in early May. Papademos still believes greece leaving the euro is an event “unlikely to materialize,” and also called it an “unwanted scenario.”

The euro fell sharply in late US trading and the stocks dropped sharply from their highs when some brief headlines crossed the wires, leading to confusion about whether Greece was making contingency plans for a Euro exit.

Papademos spoke to CNBC after the market closed, past 1am Athens time to elaborate on the headlines. Papademos was prime minister until just a few weeks ago, and helped lead the country through the largest debt restructuring in history and helped implement a new bailout agreement for the country.

A former central banker, Papademos told CNBC that “pressure on the banks has eased” in recent days. There were and still are fears in the market that their might be runs on banks if Greek citizens believe a euro exit is coming. But Papademos suggested deposit out-flows had slowed.

Greece is in the process of recapitalizing its banks with the help of 50 billion euros in bailout money from its European partners. Just this evening, the banks reached a “subscription agreement” with the Helleneic Financial Stability Fund which will allow for the first disbursement of 18 billion euros within the week. Papademos believes the recapitalization will help restore confidence in Greek banking system because it will allow Greek banks to fund through ECB once again. (moneycontrol)

PS Greek saying: Think before you speak…

See also Kathimerini