Posted on 12/06/2011 9:57:51 AM PST by kcvl
Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending -- and are inadvertently making the recession even worse.
Georgios Provopoulos, the governor of the central bank of Greece, is a man of statistics, and they speak a clear language. "In September and October, savings and time deposits fell by a further 13 to 14 billion euros. In the first 10 days of November the decline continued on a large scale," he recently told the economic affairs committee of the Greek parliament.
With disarming honesty, the central banker explained to the lawmakers why the Greek economy isn't managing to recover from a recession that has gone on for three years now: "Our banking system lacks the scope to finance growth."
He means that the outflow of funds from Greek bank accounts has been accelerating rapidly. At the start of 2010, savings and time deposits held by private households in Greece totalled 237.7 billion -- by the end of 2011, they had fallen by 49 billion. Since then, the decline has been gaining momentum. Savings fell by a further 5.4 billion in September and by an estimated 8.5 billion in October -- the biggest monthly outflow of funds since the start of the debt crisis in late 2009.
The raid on bank accounts stems from deep uncertainty in Greek households which culminated in early November during the political turmoil that followed the announcement by then-Prime Minister Georgios Papandreou of a referendum on the second Greek bailout package.
(Excerpt) Read more at spiegel.de ...
Not sure you grasp the severity. Yes, it’s their money. Problem is, a run on banks means “their” money isn’t there to withdraw. Only a tiny fraction of deposits is kept on hand as cash.
It’s kinda like thinking “I can go to the store to buy groceries any time” - except when EVERYONE does at the same time, and most find only empty shelves.
Yeah, I’ve been eyeing that “ten days” prediction for, hey, it’s almost ten days!
I not only understand the problem, I also understand the solution.
“Its kinda like thinking I can go to the store to buy groceries any time - except when EVERYONE does at the same time, and most find only empty shelves.”
The smart thing to do is make sure you have food before everyone else goes running for it. Exactly what the intelligent Greeks are doing in this situation, getting out before they become victims. The problem with financial musical chairs, is that just like real musical chairs, when the music stops someone’s out of luck. If people don’t move to get their money out, and now, they’ll all be left without the figurative seat, but the seats are diminishing whether they decide to take one or not.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.