Greeks are trapped in a storm of political instability and economic uncertainty with recession at -7% and unemployment over 21%. While they are struggling to cope with the situation and make ends meet, they are exposed to a barrage of statements coming from abroad and threatening them euro exit. Even if this is not that simple and would not occur from one day to next. €
So what do Greeks do to escape a possible economic collapse? They run to banks and withdraw their savings. Then a euro exit and consequent return to a new national currency, call it Drachma, would mean an automatic and enforced exchange of bank account deposits from euro into drachma accompanied by a sharp devaluation of the new currency, most possibly at 50%.
Greeks have been withdrawing their deposits from banks in regular intervals during the last three years, especially after the country sought the aid of International Monetary Fund in May 2010. Every euro exit threat translates into an automatic reflex of go to the bank and withdraw money.
According a February statement of then Finance Minister Evangelos Venizelos 65 billion euro ‘left’ private bank accounts since 2009. Some of these amounts were stored “under mattresses”, other were transferred to banks abroad, while a third part was used to cover up household needs.
The latest wave of bank deposits withdrawing occured after the elections as it was becoming more and more clear that political parties won’t be able to form a stable government and economic instability would prevail.
Speaking to three political leaders at a coalition government talks meeting on Monday, president Karolos Papoulias said that “700 million euro had been withdrawn from private bank accounts”.
According to the minutes of the meeting Papoulias informed Samaras (ND), Venizelos (PASOK) and Tsipras (SYRIZA) on a briefing he received on the issue by the governor of Bank of Greece, Giorgos Provopoulos.
“Withdrawing from banks exceeded more than 600 million euros when I last called him [Provopoulos] at 4 o’ clock in the afternoon, they must have reached 700 million by now. Characteristically Provopoulos told me that of course there is not panic, but there is a big fear that could turn into panic. He [Provopoulos] also mentioned that the power of banks is very weak at the moment,” the president said and added “the banks could collapse should the deposits withdrawal continue”. (also state radio ERT)
Papoulias’ statements caused some confusion, with many wondering whether the amount the president mentioned was referring to a whole week May 7-May 14 or to a single day.
A friend of mine, a banker, that no more than 250 million euro in cash can be withdrawn within a single day, however bigger amounts can be withdrawn per bank orders. He also stressed that one billion euro left the banks starting the day after the elections on May 6. That is deposits at the banks dropped from 168 billion euro down to 167 billion euro, from May 7th to May 14th 2012.
However the banker underlined that the phenomenon was far away from being a bank run.