Greek Bank Run Intensifies – Exacerbates Greece’s Misery

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Greek citizens continue withdrawing money out of the domestic banks. This process has intensified recently as the situation continues deteriorating.

The rise in unemployment, now getting close to 20%, forcing many Greeks to use their savings for day to day life. Also the harsher austerity measures make income smaller and costs more expensive. But it’s also the international atmosphere.

When former Greek Prime Minister George Papandreou suggested a referendum for deciding upon the latest deal for Greece, German chancellor Angela Merkel and French president Nicolas Sarkozy made the strongest statement so far.

They talked about Greece leaving the euro-zone on the eve of the G-20 Summit in Cannes. This was the first time that this option was said in the open.

If Greece leaves the euro, the Greek banking system could collapse quickly, together with the value of the old/new currency. As an emergency measure, the authorities could freeze bank withdrawals.

Some citizens are getting ready for this option. The richer ones have already transferred their funds abroad, with an estimate of 200 billion euros in Switzerland.

The recent figures regarding money leaving the banks are very worrying:

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.

This outflow of money turns back at the economy: with less funds, the banks have a smaller lending capacity, which in turn further weakens the economy.

After a long time, Greece received the long promised tranche of aid. This may be the last one before leaving the euro. The upcoming EU Summit could introduce a mechanism for countries to exit the euro-zone, voluntarily or not.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

19 Comments

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  6. Bonnie Smith on

    This is very bad for Greek citizens and also for Greek Bankers.

  7. They will have currency controls in the Euro block before the new year is in.

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  10. Peter L. Griffiths on

    The outflow from the Greek banks are presumably Euros. Greece is presumably not in a position to issue securities repayable in Euros. This situation could be put right by a uniform fiscal and benefits system in Euros throughout Europe, and also a uniform banking system.

  11. It seams that central banks in eurozone countries are making contingency plans for the possible collapse of the euro. Demand for money-printing services is expected to soar as old national currencies prepare for a come-back. There is a Euro leaders summit just few days in time and we shall see what is the future of Greece and Eurozone.

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