February 20, 2015 / 12:30 PM / 4 years ago

UPDATE 1-Greek bank deposit outflows jump amid long weekend jitters-sources

(Adds quotes, details, background)

By George Georgiopoulos

ATHENS, Feb 20 (Reuters) - Greek bank deposit outflows accelerated to a total of over 1 billion euros over the past two days, three senior banking sources told Reuters on Friday, little more than a week before the country’s EU/IMF bailout deal is due to expire.

Withdrawals returned to levels before elections last month that brought a radical left-wing government to power, topping 500 million euros on Wednesday and again on Thursday due to fears about Greece’s future in the euro zone.

With Athens struggling to secure a new funding deal with the euro zone before the bailout expires on Feb. 28, Greeks are increasingly nervous before a three-day weekend. This is due to memories that Cyprus imposed capital controls over a long weekend during a crisis in 2013, one senior banker said.

“Depositors have connected the three-day weekend with the capital controls that happened in Cyprus,” the banker said, while noting that the Cypriot crisis was different since it was caused by the collapse of a bank.

Monday is a public holiday marking the start of the Greek Orthodox Lent season. The government, which was elected on promises to end austerity and scrap the bailout programme, has denied it has any plans for capital controls.

But euro zone countries led by Germany are demanding that Athens honour all its promises under the bailout to impose austerity policies and economic reforms, raising fears of an impasse that could lead to Greece running out of money and even leaving the euro zone.

“We have gone back to levels in the weeks before the Jan. 25 election. Deposit outflows topped 500 million in each of the last two days,” the banker said.

The bleeding from banks put outflow levels close to the worst seen in January - when an estimated 12 billion euros left the system over the whole month - before slowing somewhat in February, bankers said.

Some Greeks are withdrawing cash to put in safe deposit boxes or hide at home, while others are switching their deposits into money market and bond mutual funds abroad. They fear the government might prevent them from withdrawing funds as a possible first step to preparing for a Greek exit from the euro, should the talks with the euro zone fail.

In 2013 Cyprus closed its banks for almost a fortnight due to a banking crisis. It remains in the euro zone but still has some capital controls, although they now cover only large transfers of cash abroad.

Greek banks have been receiving emergency funding controlled by the European Central Bank. On Wednesday, the ECB agreed to raise Emergency Liquidity Assistance to 68.3 billion euros but the increase was a modest 3.3 billion.

A Greek banker estimated this would cover the lenders’ needs for a week, although at that point deposits were flowing out at a lower rate. (Writing by Deepa Babington; editing by David Stamp)

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