Mendoza School of Business

Central banks stand ready on eve of Greek vote

Published: June 15, 2012 / Author: David McHugh

The following is an excerpt from an Associated Press article that quotes Finance Professor Jeff Bergstrand on the effect the Greek elections could have on markets and banks across Europe. This story also appeared on CBS News. To read the entire story visit: Central banks stand ready on eve of Greek vote.

On the eve of Greek elections, Europe’s central bankers are hoping to avert a financial panic by signaling their readiness to support banks.

At the same time, the head of the European Central Bank is calling on nations to pursue steps that could eventually boost economic growth, such as easing corporate regulations.

For now, the stresses gripping Europe from its debt crisis are tightening. Governments are struggling to borrow. Banks are wary of lending to each other and their customers. And nervous depositors are pulling money from Greek and Spanish banks.

As European officials head for a Group of 20 summit in Mexico, where they’ll face pressure to defuse the crisis, central bankers say it’s up to government leaders to find a solution.



This weekend’s national elections have become the latest focal point in Europe’s crisis. The left-wing Syriza party wants to abandon Greece’s international bailout terms. If that happened, Greece could be cut off from the bailout loans it needs and could face bankruptcy and leave the euro.

Jeffrey Bergstrand, a professor of international finance at the University of Notre Dame, said that if the Greek elections end with uncertainty about the results, the ensuing chaos could require intervention to stabilize markets and banks across Europe.


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