ATHENS, Greece - A senior judge was sworn in Wednesday to head Greece's caretaker government for a month as it lurches through a political crisis that threatens its membership in the 17-nation eurozone.
The political uncertainty is worrying Greece's international creditors as well as Greeks themselves, who have withdrawn hundreds of millions of euros from banks since the May 6 election.
Council of State head Panagiotis Pikrammenos, 67, was appointed earlier Wednesday to head a government that will lack the mandate to make any binding commitments until a new election, which is expected June 17.
About €700 million ($898 million) in deposits have left Greek banks since May 7, the day after the election, President Karolos Papoulias told party leaders after being briefed by central bank governor George Provopoulos.
"The situation in the banks is very difficult," Papoulias said according to a transcript of the meeting's minutes released Tuesday night. "Mr. Provopoulos told me that of course there is no panic, but there is great fear which could turn into panic."
There were no queues at banks in Athens after the May 6 election, but Greeks have been gradually withdrawing their savings over the past two years as the country's financial crisis deepened, either sending the money abroad or keeping it in their homes.
"I would expect the population to quietly be doing what it has been doing in the last days. In other words, some of the Greek citizens are afraid and are taking a portion of the money, but I'm not expecting a bank run," said Theodore Krintas, managing director of Attica Wealth Management.
The May 6 election saw a massive rise in popularity for parties that advocate pulling out of Greece's commitments to its international bailout deal, under which it agreed to strict austerity measures in return for billions of euros in rescue loans. The spending cuts and tax hikes have left the country mired in the fifth year of a deep recession and sent unemployment soaring to above 21 per cent, and many argue the country cannot hope for recovery if they stick to the deal.
"I want to believe that next time the people will express their opposition to the bailout agreement even more adamantly so that a strong government will be formed without the current parties," civil servant Christina Papadopoulou said of the repeat ballot.
Negotiations to agree on a coalition government collapsed Tuesday, nine days after voters furious with the handling of the country's financial crisis deserted the two formerly dominant parties in favour of smaller anti-bailout groups. The election left no party with enough votes for a majority in parliament.
"In a democracy, new elections are the natural consequence of the impossibility of forming a government following an election. It will now be for the Greek people to take a fully informed decision on the alternatives, having in mind that this will be indeed an historic election," said European Commission President Jose Manuel Barroso.
"We will of course respect the democratic decision of the Greek people," he added. "At the same time, Greek citizens should be aware that there are 16 other democracies in the euro area."
Greece is being kept afloat by bailout loans from other eurozone countries and the International Monetary Fund, and losing them would lead to state coffers running out of money, including for pensions, health care and salaries. It is unclear how the June election will affect the continued disbursement of the loan installments.
"It is our wish, and I think the wish of all Greece's European partners, that a Greek government which is capable of acting emerge as soon as possible from these elections," German Chancellor Angela Merkel's spokesman, Steffen Seibert, said in Berlin.
The spokesman would not comment on the bailout money due Greece at the end of June.
The instability has led to questions about Greece's prospects of remaining in the euro.
"If the country's budgetary commitments are not honoured, there needs to be appropriate revisions, which means either supplementary financing and additional time, or mechanisms for an exit, which in this case must be orderly," IMF head Christine Lagarde said on France 24 television.
Greece leaving the euro "is something that would be extremely expensive and would pose great risks, but it is part of the options that we must technically consider."
Greece now faces of month of inertia, with a government hamstrung by party leaders' insistence that it can take no binding decisions.
Alexis Tsipras, head of the Radical Left Coalition, or Syriza, which came a surprise second in the May 6 election after campaigning on an anti-bailout platform, said he had requested "that the caretaker government should not implement measures that would involve further cuts in salaries, pensions and public spending, that would dismantle labour relations or allow privatizations. "
Tsipras said he also asked for a freeze on every ongoing sale of state property.
The Greek privatization fund later said it had already decided to delay until after the election any decisions on the country's key commitment to sell off some state assets. Under its international bailout agreements, Greece must raise €19 billion ($24.2 billion) through privatizations by 2015 — and has so far raised about €1.5 billion.
Tsipras is the front runner for the next election. Recent opinion polls have shown him as likely to come first in the June vote, though with nowhere near enough votes to form a government on his own.
The two mainstream parties, conservative New Democracy and socialist PASOK, have warned that anti-bailout policies will lead Greece out of the euro.
"Two courses lie ahead of the Greek people: Either to change everything in Greece — with changes which can be carried out in a Europe that is also changing — or to experience the terror of an exit from the euro, the terror of isolation outside Europe and the collapse of all we have built so far," said New Democracy head Antonis Samaras.
A win by Tsipras would put him in a dominant position to make a coalition deal with other anti-bailout parties.
"This will make reaching an agreement between the next government and Greece's international creditors extremely difficult, raising the risk of a Greek exit from the euro and sovereign debt default," said Robert O'Daly, Senior Economist at the Economist Intelligence Unit. "The consequences of this would be dire for Greece and probably the rest of the euro area."
Geir Moulson in Berlin, Raf Casert in Brussels, Annita Mordechai, Derek Gatopoulos and Nicholas Paphitis contributed.
7 Austerity Horror Shows From Around The World
At the height of the 2008 financial meltdown, California became a poster child for living beyond one's means, as Governor Arnold Schwarzenegger declared a financial emergency over the state's $11.2 billion deficit. Though austerity measures have quelled the fears of credit ratings agency Standard & Poor's, which <a href="http://www.nbclosangeles.com/news/local/Californias-Credit-Rating-Gets-a-Boost-139342128.html" target="_hplink">recently upgraded California's rating</a> to "positive," cuts to public spending will be painful, with the axe set to fall everywhere from state parks to universities. Photo: Protestors carry signs as they demonstrate against proposed cuts to Medical and Medicare outside San Francisco city hall on September 21, 2011 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)
With a debt-to-GDP ratio of around 60 per cent, the UK's financial situation is much better than many of its international peers. But in the wake of record-breaking budget deficits and continued economic unrest, the country's centre-right government is pursuing <a href="http://blogs.wsj.com/source/2012/02/01/sheer-scale-of-u-k-austerity-measures-revealed/" target="_hplink">the most far-reaching austerity program in generations</a>. The proposed cuts, which are expected to total 126 billion ($197 billion) pounds by 2016-2017, <a href="http://www.nytimes.com/2011/11/30/business/global/britain-lowers-economic-growth-forecast.html" target="_hplink">include axing 600,000 public sector jobs</a>. Photo: A protester holds up a smoke bomb during a mass demonstration against government financial cuts in central London, on March 26, 2011. (CARL COURT/AFP/Getty Images)
Amid growing unease among international lenders and an annual budget deficit estimated at between six and eight per cent of GDP, Spain's government last year <a href="http://www.bbc.co.uk/news/business-16364313" target="_hplink">set the stage for an 8.9-billion-euro ($11.5 billion) austerity package</a>, the first in a wave of spending cuts and tax hikes expected to amount to 16.5 billion euros in 2012. But after allegedly dragging its heels in advance of a regional election, Spain is reportedly in danger of <a href="http://www.reuters.com/article/2012/02/14/us-eu-spain-deficit-idUSTRE81D0LG20120214" target="_hplink">receiving a fine from the European Union for not doing more to reduce its deficit</a>. Photo: Thousands of police, teachers and hospital staff stage a mass protest march in Barcelona on January 2012 in growing anger at spending cuts hitting key services in Spain's Catalonia region. (JOSEP LAGO/AFP/Getty Images)
When bond yields began to drift perilously north -- a telltale sign of waning confidence among international lenders -- Italy set about reducing its debt-to-GDP ratio of 120 per cent. The <a href="http://www.bbc.co.uk/news/world-europe-16301956" target="_hplink">30-billion euro ($39 billion) austerity package approved in December</a> under interim Prime Minister Mario Monti, who took over from Silvio Burlosconi at the height of the crisis, includes measures to reduce tax evasion, health care cuts and hiking the retirement age for state workers to 66. Photo: A hand with a heart painted holds a cigarette as dozens of anti-capitalist 'Indignant' protestors demonstrated on January 14, 2012 in Saint Peter's Square at the Vatican. (TIZIANA FABI/AFP/Getty Images)
After the government's efforts to bail out six of the country's biggest banks sent the deficit soaring -- and prompted a 67.5 billion euro bailout -- Ireland embraced belt-tightening with gusto, <a href="http://www.nytimes.com/2012/01/20/business/global/irish-austerity-measures-cut-two-ways-report-finds.html" target="_hplink">reducing its annual budget deficit from 32 per cent of GDP in 2010 to 10 per cent</a>. The latest austerity program announced in December includes tax hikes, a reduction in the child benefit and cuts to public sector wages and jobs. Photo: A protester holds up two Irish flags in front of the General Post Office in Dublin on November 27, 2010 against savage cutbacks. (PETER MUHLY/AFP/Getty Images)
Tough austerity measures have sparked growing unrest in Portugal, where tax hikes and spending cuts have done little to wrench the country out of financial turmoil. Despite dodging bankruptcy in 2011 by accepting a 78 billion euro ($102 billion) bailout, <a href="http://www.washingtonpost.com/business/markets/portugal-records-double-dip-recession-in-2011-as-debt-crisis-austerity-measures-bite/2012/02/14/gIQAD0O5CR_story.html" target="_hplink">Portugal remains mired in recession</a>, as government readies to pursue even more significant belt-tightening this year. Photo: A worker speaks in a megaphone in front of the Finance Ministry in protest against government austerity measures during a demonstration launched by Portugal's biggest trade union called Portuguese General Workers Confederation (CGTP) in Lisbon, on February 11, 2012. (PATRICIA DE MELO MOREIRA/AFP/Getty Images)
At the epicentre of the eurozone debt crisis, Greece, where the debt-to-GDP ratio is estimated at 160 per cent, has had little choice but to pursue an unrelenting and aggressive belt-tightening campaign. With talks underway to secure a second massive bailout -- and amid yet another wave of violent protests -- <a href="http://www.guardian.co.uk/world/2012/feb/12/greece-austerity-cuts-euro-bailout" target="_hplink">the country recently approved another 3.3 billion euros ($4.3 billion) in spending cuts</a>, expected to come at the expense of government wages, jobs and pensions. Photo: Protesters clash with riot police at Athens touristic Monastiraki area near the Acropolis on October 19, 2011. (LOUISA GOULIAMAKI/AFP/Getty Images)