FRANKFURT A rush by consumers and firms to pull their money out of Greek banks continued in June, European Central Bank data showed on Thursday, adding to the pressure on the country's troubled banking system as doubts grow about Greece's future in the euro.
Speculation about Greece possibly quitting the euro was intense in May when anti-bailout parties saw a strong showing in elections, but the Greek central bank said the process had reversed after the June 17 election.
The ECB's data for June showed that deposits for the month as a whole continued to decline. Private sector deposits in Greek banks fell almost 5 percent, matching the previous month's sharp decrease.
The total fell to 156.2 billion euros at end-June from 163.1 billion a month earlier and is more than one-third below the peak in December 2009. They are now at their lowest level in more than six years.
Analysts said it was possible that deposits had started to return after the elections, but did not make up for the falls early in the month. However, as long as doubts about the country's future in the currency union continue, people might prefer cash holdings to bank deposits.
"It could be that there were sharp falls in the first weeks of June and then recovery," ABN Amro economist Nick Kounis said.
"But if you think, election or no election, there is quite a significant probability of a Greek euro exit, then arguably the most prudent course of action is deposit withdrawal."
The ECB dealt Greek banks another blow by saying it would cease accepting Greek government bonds starting July 25. The move leaves Greek banks dependent on the national central bank's Emergency Liquidity Assistance (ELA) for funds, as they have been shut out of interbank markets.
ELA funds are more expensive than those available at money markets or the ECB's regular refinancing operations, where banks can get cash at 0.75 percent annual rate.
Analysts saw Greek bank pain continuing as long as the country is teetering on the brink of insolvency.
"The biggest problem that the Greek banks have is the sovereign and they have been holding a lot of sovereign debt," Kounis said.
Greek banks' holdings of government bonds, adjusted for market value, have fallen to 19.5 billion euros in June from 50.2 billion a year ago and hit their lowest level since the beginning of statistics in March 1998.
Portuguese deposits dropped 3.5 percent in June to their lowest level since October 2010. Ireland posted a 2 percent decrease in deposits. In Spain, they fell by less than 1 percent to their lowest level since July 2008.
Italy fared better, with deposits rising almost 2 percent.
Monthly fluctuations in the figures are common, though sharp consecutive drops in countries with stable banking systems are unusual.
The data, which are for all currencies combined, are not seasonally adjusted and differ slightly from national central bank figures. The measure excludes deposits from central government and financial institutions.
(Additional reporting by Marc Jones, editing by Mike Peacock)