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Greek Deposit Outflows Soar In Run-Up To Syriza Victory
Despite all the fear-mongering by Nea Demokratia (ND), Syriza's victory over the incumbent is dramatically larger than expected (exit polls indicate a potential 12 point margin vs 7 point spreads in the run-up). However, as JPMorgan details, the fear-mongery was very evident in bank deposit runs as proxied outflows surge EUR8 billion last week - more than all of December and the rest of January combined...
Via JPMorgan Flows & Liquidity
Greek deposit outflows rise sharply this week
The monthly Bank of Greece balance sheet data for the month of December revealed a significant increase in Greek bank ECB borrowing which rose by €11bn in December to €57bn (including €1bn of Emergency Liquidity Assistance). This is more than the €3bn deposit outflow reported for December. It is thus likely that Greek banks had to borrow even more in December to offset not only their lost deposits but likely reduced access to private repo markets, as it happened before during Greek crisis.
The approval this week by the ECB of additional ELA is encouraging. According to reports, not only did the ECB give its approval for Greek banks to borrow more funds via ELA but it also opened the door for ELA to continue post the expiration of the Greek bailout program on Feb 28th with only two conditions: that Greek banks are solvent and that they have enough collateral, i.e. the ECB did not condition ELA on the continuation of the Greek bailout program after Feb 28th.
As of December 2014, Greek banks had borrowed only €1bn via ELA but had a lot more collateral. The collateral that was posted with the ECB at year-end was €23bn which, assuming it includes mostly credit claims with a 50% average haircut, would be enough for Greek banks to borrow €11bn via ELA, i.e. an additional €10bn on top of the €1bn they had already borrowed by year-end. Greek banks have a lot more of credit claims, more than €100bn, to raise their ELA borrowing by even more if needed in February or beyond.
We argued in recent weeks that one indirect way of gauging the pace of bank deposit outflows in Greece on a high frequency basis is to look at the inflows into offshore money market funds such as those based in Luxemburg. Purchases of offshore money funds, one way for Greeks to invest their withdrawn bank deposits, spiked to very high levels this week. These purchases totaled €206m during Mon-Thu this week vs. €91m over the previous week (between Jan 9th and Jan 16th), €54m in the week before (between Jan 2nd and Jan 9th), and €107m for December as a whole (€24m per week between Dec 1st and Jan 2nd).
So there is a sharp acceleration this week. If the €3bn deposit outflow reported by the press for the month of December is accurate and these offshore money market purchases are a good proxy for deposit flows, we should have seen deposit outflows of around €4bn in the first two weeks of January and a large €8bn deposit outflow this week alone.
The fear factor, New Democracy’s biggest weapon, has thus risen sharply this week [and clearly backfired].
* * *
What do Greeks do with the funds they withdraw from banks? It appears they keep it under the “mattress”.
The quantity of banknotes placed into circulation by the Bank of Greece has increased significantly, by €2.2bn in December, suggesting that more than 70% of withdrawn Greek deposits went under the mattress. Figure 2 above also shows that of the €27bn of cash that went under the “mattress” between end of 2009 and mid 2012, only half has re-entered the Greek banking system.
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Bank runs!
This is why greek real estate and especially farmland is still relatively overvalued. People don't want to have their money in the bank or the stock market so they put it in the ground.
... lead to Bankster incontinence.
~"bank deposit runs as proxied outflows surge EUR8 billion last week"~
I guess the bad news is that Greece, or whatever is left over after this vote, is going to have less money to steal from depositors once the dust settles. The upside is that those fortunate or prescient enough to move money out had some place to move it to.
But here is the real question: Where will Americans scurry to with their money when this little circus comes to their town? Because come it will, and I fear there shan't be anyplace to hide.
Gold and Silver
The more you read about Greek history the more interesting this story gets.
http://en.wikipedia.org/wiki/Greek_drachma#Third_modern_drachma
Holy Zimbabwe, BernankeMan!!
Also in the same Wikipedia page - the exrate went from 30 to the USBuck in 1973 after Bretton Woods was taken to the Woodshed, and ended at 400 to the buck when the Euro came in.
No wonder that Mattresses with zippers are a popular item in Greece at the moment.
Thanks for the post - I didn't know Greece went 'babwe in the '40s. It's not recorded in Hanke and Krus' World Hyperinflations paper.
Greece election: sets up eurozone showdown
The radical left is likely to defeat the centre-right governing party today, challenging Brussels over repayment of EUR320bn debt and enforced reduction of living standards Patrick Cockburn 25 January 2015It was raining yesterday in central Athens, which…
EURO tomorrow 1,05?
http://tersee.com/#!q=greece&t=text
Dollars, Swiss Francs in those mattresses. Maybe British Pounds as well.
Defintely not euros or rubles.
Maybe yuan or Hong Kong dollars....that would be interesting.
Animal husbandry
https://pbs.twimg.com/media/B8NrU_CIcAAt6kt.jpg
Now we know where Draghi's QE should be ALL destined...
This is gonna be fun. If the new Government is smart (not likely) they could start using the EU's own banking laws against them.....
You want Show Trials?
They will still be broke, unable to collect taxes, and moving in the direction of regulation, more Free Stuff, confiscation of private property for the "public good", etc.
Venezuela and Zimbabwe, here we come!
I agree. If this causes them to leave the euro and default, no one is going to buy new drachma denominated debt, the bond markets will be off limits to them for many years so they will print to the moon, and eventually the whole corrupt , bloated govt will collapse, and maybe then they can actually have a chance to start over again fresh
post free money times, now we will see their true colors-taxes baby taxes! how else. bend over rich, the tax man cometh for your hard earned or ill gotten wealth
some pain for the new socialists...
loans, ha, your track record says no moar money for nothin and chicks are to be paid for in advance (room on left -cash plez)...
People don't know what to do with their money. This money needs to be confiscated and given back to the banksters and politicians who know what to do with other people's money.
Mr. Panos has his bank in his basement. Drachma's!
Greeks and other Euro holders: Here's a nice vacation spot:
http://www.investing.com/commodities/gold-advanced-chart
RUN FOREST GUMPIDAPOLOUS! RUN!
Say it with me : DRAXMAS
Ouzo for everyone....
Keep voting Left, until everywhere looks like Detroit!
Keep voting Right, until everywhere looks like Detroit!....
Detroit is run by Republicans?!
Right out of the Leftist playbook: "If you tell a lie big enough..."
http://en.wikiquote.org/wiki/Joseph_Goebbels
The expectation of the leftwing Syriza gaining a majority has people withdrawing their money from banks?
Another shocker ;-)
The Greeks are probably afraid of Cyprus "solution" being imposed on the Greek depositors.
Anyone want to bet Greece will be worse off?
Even so.....Short term pain for long term gain. I wish them well going forward.
Looks like the newish econ minister just told the EU to piss off.
https://twitter.com/openeurope/status/559435500357181441