Now here is something interesting. A slow but inexorable run -more a brisk stroll at the moment really, but I think it’s significant, has started on Greek banks. Money has been seeping steadily out of the banks since the start of 2010 but it is picking up speed right now. Savings and deposits in Greek banks have fallen from €237.7 billion at the start of 2010. September 2011 saw 5.4 billion pulled from the banks and October it increased to 8.5 billion. Figures are not available for the last couple of months but they are not less.
Why? Well if Greece were to default, then the savings of your average Demetrius in the street would be instantly frozen in the bank so he could not get his hands on it before being immediately converted from useful Euros to New Drachmas by the Government. Then whilst the Government imposes a “Bank Holiday” closing all the institutions, the ordinary man’s life savings will promptly be devalued by oh say 30 -40% to make the country competitive.
So, wise Greeks are shifting significant chunks of their savings to banks elsewhere, like say Germany or Switzerland. At first it was your upper middle class doing this, the Doctors and professionals who it is claimed didn’t pay their taxes anyway as well as more financially astute. Now its the turn of pensioners and the ordinary guy in the Taverna to shunt money out of Greek Banks. Greeks are voting with their feet.
All of which takes money out of the banking system, meaning the Banks in turn cannot make money available to businesses or each other and indeed could unbalance some weaker banks terminally, precipitating the very collapse everyone hopes will never come.
Tim Geithner has chosen just the right time to come to Europe dressed as Santa Claus.
Copyright David Macadam 2011