Two years after the crisis began, a Greek exit could still cause havoc

The odds of a Greek exit from the euro shorten by the day. An inconclusive result to a first election on May 6th has led to a caretaker government, and the scheduling of another poll in mid-June. The obvious trigger for a Greek exit would be an election result signaling rejection of Greece’s austerity programme. But events could move faster still if Greeks start voting with their mouses and begin a bank run.

Runs these days start not with a queue of people lining up to withdraw cash but with clicks of a computer to transfer money abroad or to buy bonds, shares or other assets. The banking system has lost about a third of its total deposits over the past two years, some of this as people run down savings. There are worrying indications that this trickle of deposits has started to swell in recent days.

Karolos Papoulias, the president of Greece, said on May 14th that he had been warned by the central bank that depositors had just withdrawn some €700m ($894m) from Greek banks. Reliable figures will not officially be released for weeks, but bankers say that as much as €1.2 billion flowed out on the 14th and the days immediately after. Bankers say that outflows have continued through this week but at a much slower pace. “Most of the hard money has already left,” says one. “Now we are seeing a flare-up [of withdrawals] from small depositors who don’t know what to make of what is said on the evening news.”

More worrying still is the potential for deposit runs to spread to other vulnerable euro-zone countries such as Portugal or Spain. “The typical thing with a bank run is it trickles and then it floods,” says one banker. “The real concern is that you could have the dam breaking, first in Greece, but then elsewhere.” For now, households in other countries seem to be leaving their deposits where they are. But big companies are sweeping money out of peripheral banks and countries. In Britain some local-government bodies are reportedly moving their deposits from Santander’s British bank, even though it is locally capitalised and supervised.

With four weeks of political limbo ahead in Greece, the short-term task is to try to quash any runs before the poll. The authorities could do much to restore confidence by quickly injecting into Greek banks some €48 billion in new capital that has been earmarked by the European Financial Stability Facility for this very purpose. The European Central Bank (ECB), which this week stopped conducting some monetary-policy operations with some Greek banks because they were not yet recapitalised, could also do more to reassure depositors by showing that abundant liquidity is on hand. That is a gamble, however: showing depositors that the cash is there if they want might encourage the outflow, not stanch it.

If Europe and Greece are able to hold the ring until the next election, that still leaves the possibility that Greeks may vote in a government that chooses to leave. Bankers in Greece are praying that won’t happen. “Leaving the euro is a nightmare,” says one Greek banker. “It’s not like Argentina where there already was a currency. Here the economy would instantly revert to barter.” Yet the risks of an exit stretch well beyond Aegean shores.

The direct financial costs of a Greek exit to the country’s creditors are more manageable than they were, but they are still large. By far the biggest losers of any Greek exit would be European taxpayers. The Greek central bank owes about €100 billion to the other central banks that are members of the euro.

India charges Italian marines with murder of fishermen

Indian police have charged two Italian marines with the murder of two Indian fishermen. The marines are accused of shooting the two fishermen dead in February after allegedly mistaking them for pirates.

Italy has recalled its ambassador for consultations. It says the incident took place in international waters and that the men should be tried in Italy. The marines were guarding an Italian oil tanker off India’s south-western coast when the incident occurred.

The marines, Massimiliano Latorre and Salvatore Girone - are being held in the central prison in the Keralan state capital, Trivandrum. Italy agreed in April to pay 10m rupees (£117,013; 143,203 euros; $189,000) in compensation to each of the families of the two Indian fishermen.

In return, the families agreed to withdraw civil court cases against the marines.

However, the diplomatic row between the countries continued despite the compensation and talks between the two governments. ‘Warning shots’

Italy said that the Indian fishing boat had behaved aggressively and ignored warning shots from their ship, the oil tanker MV Enrica Lexie.

But India said the fishermen, Selestian Valentine and Ajesh Pinky, had been unarmed.

The Indian government initially said the event had occurred in its territorial waters and that the marines should therefore be tried under local laws.