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Papademos: No Preparations in Greece for Leaving Euro

Tuesday, 22 May 2012 | 9:08 PM ET

Former Greek Prime Minister Lucas Papademos says there are no preparations underway in Greece for possibly exiting the euro.

Lucas Papademos
Photo: Louisa Gouliamaki | AFP
Lucas Papademos

In a brief conversation with CNBC late Tuesday, he said he is not aware of any specific preparations in European institutions or other European countries.

Still, he "cannot exclude the possibility" that countries are making preparations due to increased fear of such an event, driven by the country's inconclusive elections in early May. Papademos believes Greece leaving the euro is an event that's "unlikely to materialize," and also called it an "unwanted scenario."

The euro fell sharply in late U.S. trading and the U.S. stocks dropped sharply from their highs after media reports quoted Papademos as saying preparations for the country's exit from the euro zoneare being considered.

Papademos spoke to CNBC after the close of trading on Wall Street, past 1 a.m. Athens time, to clarify the reports. Papademos was prime minister until just a few weeks ago, and helped lead the country through the largest debt restructuring in historyand implemented a new bailout agreement for the country.

The former central banker told CNBC that "pressure on the banks has eased" in recent days. There were, and still are, fears in the market that there might be runs on banks if Greek citizens believe a euro exit is coming. But Papademos suggested deposit outflows had slowed.

Greece is in the process of recapitalizing its bankswith the help of 50 billion euros ($63.8 billion) in bailout money from its European partners. On Tuesday evening, the banks reached a "subscription agreement" with the Helleneic Financial Stability Fund, which will allow for the first disbursement of 18 billion euros($23 billion) within the week. Papademos believes the recapitalization will help restore confidence in Greek banking system, because it will allow Greek banks to resume funding through European Central Bank.

—By CNBC’s Michelle Caruso-Cabrera

Contact Europe: Economy

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