People pass Bank of Greece in Athens last week
Jitters over whether Greece will be forced out of the euro have turned the focus of policymakers in recent days on whether Greece is on the precipice of a bank run.
It’s no mere academic exercise; a full-scale bank run would force the European Central Bank and eurozone lenders to either pump in more money – without a new government in place, and no assurances Athens would live up to the rescue terms – or pull the plug on Greece’s financial sector.
Since a banking sector without a central bank would essentially force Greece back to the barter system, there would be few options left then for Athens to begin printing its own currency again. Essentially, the drachma would return through the back door.
As we reported in today’s dead-tree edition, senior eurozone officials responsible for monitoring the currency area’s banking system said the rate of withdrawals thus far falls short of a panic. But the International Monetary Fund’s recent report on Greece makes it clear that a slow-motion bank run has been under way for more than two years, with close to 30 per cent of deposits being pulled out since the end of 2009. Read more
Welcome to our rolling coverage of the reaction to elections in France and Greece on a big day for Europe.
By Tom Burgis, John Aglionby and Esther Bintliff in London with contributions from FT correspondents around the world. All times are London time.
This post should update automatically every few minutes, although it might take longer on mobile devices.
12.44 Borzou Daragahi, the FT’s north Africa correspondent, reports on the response to the French election results in the Arab world:
Across a region undergoing tumultous change, many greeted the fall of Nicolas Sarkozy with glee, hopeful it would spell the end of French foreign policies considered too Atlantacist, pro-Israel and anti-immigrant.
Though many Libyans hailed Mr Sarkozy for his role in spearheading Nato’s help in toppling Col Muammer Gaddafi, others remember his administration’s cozy ties with deposed Tunisian leader Zein el Abidine ben Ali and Egypt’s former President Hosni Mubarak.
Ties between Tunisia’s new government, dominated by a coalition of Islamists and leftists, and France have grown particularly strained. In an interview with the FT in January, Islamist party leader Rachid Ghannouchi accused France of arrogantly giving Tunisia ‘lessons’ on economic and social policy despite its own problems.
Mustapha Ben Jaafar on April 27, 2012. AFP PHOTO/ FETHI BELAIDFETHI BELAID/AFP/GettyImages
After Mr Sarkozy’s defeat, Mustapha ben Jaafar, speaker of the Tunisian parliament and leader of the left-leaning Ettakatol party, hailed François Hollande’s arrival as way to update bilateral relations.
“We are hopeful that the arrival of the Socialists will give impetus to the historically strong relationships between our two countries,” he said in a statement. “With France, the new democratic Tunisia wants to build a true partnership that respects the values of freedom and human rights, based on a strategy of co-development and shared prosperity.”
12.22 The election results in Greece testify to widespread dissatisfaction with the country’s mainstream conservative and socialist parties. Voters have punished the political groups they see as jointly responsible for the economic crisis, with once marginal groups rapidly gaining ground.
France's Nicolas Sarkozy has made EU borders an issue in his re-election campaign
The issue of the European Union’s passport-free travel zone has become a political hot potato again, thanks in part to Nicolas Sarkozy, who has warned during his presidential re-election campaign that France would withdraw from the border agreement unless more safeguards are adopted.
With just days before voting in the first round of the French election, Sarkozy’s government is pushing the issue back onto the EU agenda, this time with German assistance.
In a joint letter sent to the Danish presidency, Claude Gueant, the French interior minister, and Hans-Peter Friedrich, his German counterpart, are calling for countries to be granted the right to re-impose border controls unilaterally for 30 days if national authorities believe other countries – particularly on the EU’s southern and eastern frontiers – aren’t securing their borders.
A leaked copy of the letter Brussels Blog got its hands on (in French) can be read here. A look at the proposal (in English) after the jump… Read more
Poul Thomsen, head of the IMF mission to Greece
On Friday, after much of Europe shut down for the week, the International Monetary Fund issued its 231-page report on Greece’s new €174bn bailout, which seems to struggle to keep an optimistic tone about Athens’s ability to turn itself around over the course of the rescue plan.
But the IMF report is worth scrutinising for reasons beyond its gloomy prose: If there’s anyone who might force eurozone leaders back to the drawing board once again, it’s the IMF, which essentially pulled the plug on the first €110bn Greek bailout early last year when it became clear it wasn’t working.
Signs that the IMF is on a bit of a hair trigger litter the new report. Read more
Most of officialdom has been referring to the second Greek bailout, formally launched today, as a €130bn rescue. But the first 189-page report by European Union and International Monetary Fund monitors makes clear it’s actually a lot larger, though the actual size depends on how your measure it.
In the latest in our occasional series “We Read Brick-Sized Bailout Reports So You Don’t Have To”, Brussels Blog will attempt to explain why the figures have gotten so confusing and the bailout is probably better described as a €164.5bn rescue. Or maybe it’s €173.6bn.
The key thing to remember is that the first €110bn Greek bailout was originally supposed to run through the middle of next year and its remainnig funding will be folded into the new package and added to the €130bn in new funding. According to the report, €73bn of the first bailout has been disbursed, leaving about €37bn left.
But here’s where it gets slightly complicated. Read more
IMF's Lagarde, Eurogroup's Juncker and German finance minister Schauble at Thursday's meeting
The Greece crisis is entering a crucial week, with private investors deciding whether to participate in a €206bn debt restructuring and Greek officials scrambling to finalise reform measures to release the last €71.5bn in bail-out money in time for a eurozone finance ministers meeting Friday.
The failure of the ministers to sign off on all the aid during a meeting in Brussels on Thursday caught a few people by surprise. Over the weekend, Brussels Blog got its hands on the report by the troika – the European Union and International Monetary Fund team that monitors Greek compliance – showing where Athens came up short.
As we reported last week, the troika evaluation (a copy of which can be found here) held that Greece had completed most of the 38 “prior actions” ahead of Thursday evening, but had not yet fully implemented all of them, particularly in the area of so-called “growth-enhancing structural measures” – mostly a series of changes in wage and collective bargaining laws aimed at driving down costs. Read more
Protest signs on a wall in central Athens
Over the last 24 hours, a flurry of activity has taken place surrounding Greece’s €200bn debt restructuring, most of it expected but some of it potentially destabilising. Because the moves involve highly technical – but still significant – judgements by occasionally obscure groups, Brussels Blog thought it was time for another guide to what to watch for in the ensuing days.
The most eye-catching announcement was the one made last night by Standard & Poor’s declaring Greece to be in “selective default”. Luxembourg prime minister Jean-Claude Juncker, chair of the group of eurozone finance ministers, put out a statement saying the move was “duly anticipated” – and he’s right. S&P signalled this way back in June when the first talk of a Greek restructuring began.
Even though it was expected, it’s still worth reflecting on: It is the first time an advanced economy has been in default since West Germany in 1948. Practically, however, the most important knock-on effect to watch will be on Greece’s banks. Read more
Ad appeared in the FT, International Herald Tribune, and Wall Street Journal's European edition
[UPDATE] The German version of the ad can be seen here via Twitter (thanks to blogger @TeraEuro for the link). It was in the mass-market daily Bild. And here’s the French version via Le Figaro (h/t @hbeaudouin).
With just days to go ahead of an expected Thursday meeting of eurozone finance ministers where they will finally give the green light to Greece’s €130bn second bail-out, a group of Greek businessmen has taken out advertisements in a wide range of international newspapers to plead their country’s case.
According to a spokesman for the group, which calls itself “Greece is Changing”, the ads were rushed into print by a group of like-minded business leaders and designed by Peter Economides, the acclaimed marketing strategist who, among other things, helped develop the “Think Different” campaign for Apple in 1997.
Economides, born in South Africa of Greek émigrés, has been on a campaign to get Greece to “rebrand” itself for months, and the ads ran in three English-language newspapers – the FT, International Herald Tribune and the Wall Street Journal’s European edition – as well as German, French and Dutch papers. (Dutch blogger Michiel van Hulten posted the version that ran in NRC Handelsblad here.) Read more
Welcome back to our continuing coverage of the eurozone crisis.
After more than 13 hours of talks, a second bail-out for Greece was agreed early on Tuesday morning. We’ll be bringing you reaction to the deal throughout the day. All times are GMT. By John Aglionby and Tom Burgis on the news desk in London.
15.45: Stanley Pignal, of our Brussels bureau, on how Jean-Claude Juncker tries to keep the mood jolly with a rolled up FT.
15.30: FT video with Martin Wolf and John Authers looks at whether the package can possibly work, while Lex writers ask anyone would invest in Greece.
15.17: Markets update – they’re still in negative territory, reports Stephen Smith, of the FT’s markets team.
| About this blog | Blog guide |
Peter Spiegel is the FT's Brussels bureau chief. He returned to the FT in August 2010 after spending five years covering foreign policy and national security issues from Washington for the Wall Street Journal and the Los Angeles Times, focusing on the wars in Iraq and Afghanistan. He first joined the FT in 1999 covering business regulation and corporate crime in its Washington bureau, before spending four years covering military affairs and the defence industry in London and Washington.
Joshua Chaffin is one of the FT's EU correspondents, covering areas including policies on trade, the environment and energy. He has worked in the FT's Brussels bureau since late 2008 and before that was an FT correspondent in New York and Washington DC. 
Alex Barker is EU correspondent, covering the single market, financial regulation and competition. He was formerly an FT political correspondent in the UK and joined the FT in 2005.
James Fontanella-Khan is FT's Brussels correspondent, covering media, telecom and internet regulation as well as justice, employment and social affairs and its impact on eastern Europe. He was formerly an FT correspondent in India. He joined the FT in 2006. 
FT's latest Brussels news
Gideon Rachman and his FT colleagues debate international affairs on The World blog.
Older entries