The country's economy is in a meltdown, raising fears that Greece will exit the Euro Zone completely and default on its huge pile of debt. NBC's Brian Williams reports.
By Alastair Jamieson, msnbc.com
Political leaders in Athens were due to discuss an emergency government Wednesday to deal with a possible run on banks as it emerged Greeks withdrew almost $900 million in a single day, fearing their country could crash out of the euro currency by the end of the week.
An interim government would take the country through to new elections on June 17, triggered by the collapse on Tuesday of talks to form a coalition between winners of the inconclusive May 6 election.
Greeks are withdrawing euros from banks, apparently afraid of the prospect of rapid devaluation if the country leaves the European single currency and returns to the drachma.
President Karolos Papoulias warned of ?great fear that could develop into a panic,? the minutes of Papoulias' negotiations with political leaders showed.
The minutes also?reveal Papoulias was warned by George Provopoulos, head of the country?s central bank, that savers withdrew at least 700 million euros ($894 million) on Monday.
"Withdrawals and outflows by 4:00 p.m. when I called him exceeded 600 million euros and reached 700 million euros," the president said according to the minutes of the meeting. "He expects total outflows of about 800 million euros."
It is not known how much was withdrawn on Tuesday.
The political vacuum in Greece has hampered the country?s chances of making the budget cuts required by the European bailout deal. Without more austerity measures, the flow of bailout money will dry up, raising the prospect of a euro exit with all its wider ramifications.
The likelihood of a Greek exit from the euro ? dubbed the "Grexit" by commentators ? is now so high that even political leaders committed to avoid it admit preparations are under way.
Asked in an interview whether Greece could leave the euro zone, IMF director Christine Lagarde replied: "We certainly don't hope so, from the IMF point of view ... but we have to be technically prepared for anything".
Will there be a run on Greek banks?
A Twitter image shared by economics blogger Tyler Durden, posted on UK website Zero Hedge, showed what appeared to lines outside ATMs in Greece, although it was impossible to verify where the picture was taken or if lines were longer than normal.
Reuters reported early Wednesday that there has ?so far been no sign? of lines at banks in Athens, despite the likelihood that an exit from the euro would see a dramatic devaluation in of Greek currency.
CNBC?s John Carney raised the prospect of reduced limits on ATM withdrawals, citing a calculation by London analysts Capital Economics that if every working-age Greek withdrew the maximum permitted ATM amount of 300 euros a day, every single deposit of Greek households would be gone within 61 days.
?So the controls put in place in advance of an exit from the euro would have to include not only limits on moving funds abroad, but limiting withdrawals from ATMs and possibly declaring a bank holiday,? Carney wrote.
In practice, however, any Greeks lucky enough to possess any savings have already taken the precaution of withdrawing them from banks.
?Over the last?two years Greeks withdrew approximately 70 billion?euros from their bank accounts, an amount equivalent to approximately 35 percent of Greek GDP,? Dr Michael Arghyrou, senior economics lecturer at Cardiff Business School in Wales told msnbc.com.
?This is a negative demand shock of enormous proportions and with increased uncertainty this trend will almost certainly accelerate. So yes, we will almost certainly see more deposits withdrawals over the next few days, I just hope is that they will not be so large as to lead to a full-blown bank run.?
How likely is ?Grexit?? Are drachma notes being printed?
A year ago, it was nearly impossible to get officials and political leaders to talk about the possibility of Greece leaving the eurozone. Now it appears to be an open secret.
Ireland's central bank chief and European Central Bank policymaker, Patrick Honohan, signaled on Sunday that a Greek exit might not be as painful as previously thought.
Yorgos Karahalis / Reuters
A man makes his way past a replica of a one drachma coin outside the Athens Town Hall May 15, 2012.
"Technically, it can be managed," he told reporters. "It would be a knock to the confidence for the euro area as a whole ... It is not necessarily fatal, but it is not attractive."
The tone from the European Commission, the EU's executive, has shifted too.
On Monday, spokeswoman Pia Ahrenhilde-Hansen said: ?We wish Greece will remain in the euro and we hope Greece will remain in the euro ... but it must respect its commitments. Greece has its future in its own hands and it is really up to Greece to see what the response should be.?
Asked about contingencies, she did not rule them out.
"There are many, many questions arising and many questions open about Greece and most answers have to come from Greece and we have to respect the ongoing political process. Clearly, the future of Greece is in the eurozone. We are working on that."
However, the official response remains that a Greek exit is not being considered. Richard Corbett, a senior adviser to European Council President Herman Van Rompuy, told BBC Radio 4 on Wednesday:?"We're not planning for a Greek exit, nobody is planning for a Greek exit."
Some commentators have pointed to a 13 percent rise in the share value of British firm De La Rue, which is the world?s largest currency printer, amid speculation it is best placed to pick up the contract for printing new versions of the drachma, the Greek currency phased out in 2002.
It has remained tight-lipped on whether it is working for the Greek government, but in the meantime an interim solution has been mooted in which existing euro notes would be converted into drachmas?by being endorsed by?an official stamp.
Reuters contributed to this report.
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