Thursday, June 16, 2011

Greek Bank Withdrawals Continue

In the first six months of 2010, we saw large withdrawals from Greek banks by what appeared to be wealthy Greek citizens who were taking their money out of Greece and perhaps the euro.  Domestic non-financial Greek corporations began a relatively steady withdrawal of time deposits in July 2009.  Non-euro residents began their withdrawals in June 2008 accelerating in December 2008.  Other euro residents to a lesser degree began a weaker pattern of withdrawals in December 2008.  A spreadsheet can be accessed at the Bank of Greece here (choose "breakdown by sector" in part A; then "deposit flows" in spreadsheet).

For the year ending March 2011, Emporiki, which is a subsidiary of the French bank Credit Agricole, saw its deposits decline 17.8% and Geniki, a subsidiary of the Fench bank Societe Generale, saw its deposits decline 12%.

One of the distinctions between a currency crisis and a banking crisis is that a currency crisis is a lack of confidence that prompts foreign depositors and investors to withdraw money but domestic depositors do not massively withdraw.  A banking crisis occurs when domestic demand depositors withdraw their money en masse.  The latter has not occurred.

However, since November 2010, Greek household deposits have declined 12,108 million euro through April 2011.  While some of this may be further withdrawals by wealthy Greeks, it appears that this series of withdrawals are probably by ordinary citizens for whom it is not efficient to take their money out of Greece.  It would appear that ordinary Greek citizens are finding it necessary to use their savings to maintain an acceptable standard of living.  With Greek unemployment in March at 16.2% and youth unemployment at 42.5% for Q1 unemployment of 15.9% or an increase of 35.1% from Q1 2010, it is not hard to understand the need of Greek households to reduce savings to live. With austerity imposing higher taxes, higher fees, lower wages, rising prices, and less work, Greece is venturing into the territory of desperation and riots with its government ready to fall as it seeks to pass another, deeper austerity program mandated by the EU, IMF, and ECB.

While you can read about Greek demonstrations when they turn into riots, there has been little to no mention of Greek domestic bank withdrawals in the Greek mainstream or government media.  The reports of domestic withdrawals have been in News247 on May 26th and sources citing News247.  In fact, there appears to be an official campaign to suppress economic opinions, debate, and information by the government which can only aggravate the tensions in a democracy and promote divisive argument.  Given recent proposals within the eurozone to strip deficit countries of fiscal decision making and place it with a central eurozone authority, to what extent is the eurozone becoming a threat to democracy and human freedom?

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