Greek Deposit Outflows Soar In Run-Up To Syriza Victory

Zero Hedge ^ | 01/25/2015 | Tyler Durden

[SeekAndFind]

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 Purchases of offshore money funds, one way for Greeks to invest their withdrawn bank deposits, spiked to very high levels this week.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.

[E. Pluribus Unum]

Looks like they’re going to run out of other people’s money sooner rather than later.

[GeronL]

Looks like what money there is - is already trying to escape

[familyop]

The same happened in Argentina a few years ago. After that, it happened faster, until the banks closed for a couple of months to stop the runs. After the banks reopened, they were very slow about allowing repatriations of foreign deposits.

[yefragetuwrabrumuy]

The ECB bureaucrats have pushed Greece so far that they would elect Hitler if he promised to get them out of this mess.

Their two “main” parties both say the same thing, basically surrendering to the ECB. Because in the final analysis, they care about business and the banks, not the “Greek on the street”. While that might be sensible in the long run, it is political suicide right now.

So now the extreme left has a chance. If they tell the EU to go get knotted, they will be popular. But their economy is in shambles, and if they can’t fix it, they will go down hard in the next election.

And then, maybe, they will elect a Golden Dawn version of Hitler.

[Vince Ferrer]

The dollar will soar against the euro. When Europe hits rock bottom, time to take dollars and invest in europe.

[Eric in the Ozarks]

They already did some years ago.
Now the Socialists will share poverty equally (if you believe that, I've got a bridge to sell ya...)

[neocon1984]

Interesting that Greeks are among the most successful immigrant groups in America. Lest you think that “white privilege” plays a role, Caribbean Blacks are also very successful ... in America.

This info is pre-Obama.

[Spartan79]

Interesting that Greeks are among the most successful immigrant groups in America. Lest you think that “white privilege” plays a role, Caribbean Blacks are also very successful ... in America.

I've always believed that there is more than a little self-selection behind this. My theory is that the type of person willing to uproot themselves and leave behind family and friends is fundamentally different than those who stay behind and stay on the dole. The first group is composed of folks willing to take a big chance and work hard to better themselves and make a life here.

I've noticed the same thing within our borders. Retired now, I ran a business here in the rust belt. As the economy stayed in the doldrums up here, the character of the available labor pool noticeably shifted. The young go-getters mostly have gone to Texas (and recently western North Dakota). That group is notably different than those still here, living in their folks' basements.

[aquila48]

And though I’m against illegal immigration, firmly believe that today’s illegals and their descendants will end up being very successful in the US given that they had to undergo an even tougher journey to make it here than legal immigrants.

[A Formerly Proud Canadian]

Coming soon: Courtesy of Syriza, the New Drachma; the 2015 version of the 1923 Papiermark.

"Smoke Spend 'em while you got 'em."

[gunsequalfreedom]

Very interesting comments you make.

[SunkenCiv]

• Arrest of Adams is 'an act against democracy' [2014]

  The European Left's candidate for the European Commission presidency, Alexis Tsipras, Friday called for the immediate release of Sinn Fein leader Gerry Adams who is been held for questioning in connection with the 1972 murder of Jean McConville. Tsipras called the arrest a "politically inflammatory act against democracy".

• European Socialists, Radical Muslims United by 'Mutual Hatred for Judeo-Christian Culture' [2015]
• Far from 'outsiders,' Europe and Islam have long been intertwined [2015]
• Putin's Western Allies: Why Europe's Far Right Is on the Kremlin's Side [2014]
• Putin Is Infiltrating European Politics With Shocking Effectiveness [2014]
• Russia may lift food import ban from Greece if it quits EU - Russian agriculture minister [2015]
• Merkel offers Russia free-trade agreement (with EU) [2015]
• Greece's radical left could kill off austerity in the EU [2014]
• Europe's Austerity Moment Is Ending (Greek election) [2015]
• Greek radical left leader Tsipras: asking for Greek people's vote to cancel the bailout [2012]
• Greece under the leftists: Debt-free, well-paid and a proud people [2012]
• Greece supports left-wing Syriza as Europe takes lurch to the right [2014]
• Juncker: Greece should avoid 'wrong outcome' in elections [2014]
• Greece Scrambles To Prevent Deposit Run Goldman Warned About In Its "Worst Case" [2014]
• Greece Heading to Early Elections After Presidential Vote Fails [2014]
• Greek Exit Disaster...or Not [2015]
• Merkel ready to let Greece exit eurozone: report [2015]
• The 2015 Greek euro drama [2015]
• EU calls euro membership 'irrevocable' but renegotiable [2015]
• Greek Radical Left on the March [2015]
• As Euro Slides, Strategists Cut Forecasts [2015]
• Global economy hopes raised after European stimulus [2015]
• Greek leftists Syriza aim for landmark election win [2015]
• Greek exit polls suggest Syriza win [2015]
• Greece election: Exit polls signal big Syriza win [2015]
• Greece: Talks with troika the main test [2015]
• Greek Deposit Outflows Soar In Run-Up To Syriza Victory [2015]
• Greek Election Update: Leftist Syriza and Conservative Independent Greeks Will Form Coalition [2015]

[SunkenCiv]

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I think there are four things which the news media and public have not come to grasp about this mess.

1. The amount of debt and economic issues are probably more serious on the average citizen than everyone imagined. If you are a diabetic....you have to use your own savings and pay cash to get insulin. Name any disease, it's serum or pills, and if it's made outside of Greece (90-percent chance), then you will burn up your savings to survive. Since 2009, Greeks have been waiting on the turn-around. It hasn't happened. It might be two decades before some economic change occurs.

2. The truth is, Greece never was ready for the Euro. It may never be ready for it.

3. Once they end their relationship to the Euro and go back to the Drachma....Greeks will find the economy just about the same and most Greeks will be surviving off the dollar or Euro as their real hard currency....rather than the fake Drachma which everyone will be trading with.

4. If you think this January election is the end of the political chaos....I'd take a deep breathe and prepare for another election before the end of the year. This January election doesn't really fix anything....it just resets the clock and makes people think there's still a better chance ahead, where there isn't.
Merkel ready to let Greece exit eurozone: report #4 posted on 01/05/2015 12:55:27 AM PST by pepsionice

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[yefragetuwrabrumuy]

It was the same problem that destroyed president Hoover. He was correct that fixing the problem from the top down would eventually fix the problem for everyone. But at the same time, people had been financially ruined, and were living close to starvation, and couldn’t wait for a top down solution.

By the time Hoover started relief in earnest for the people, the Democrats had taken control of congress and would not let any of it pass, as they saw the opportunity to utterly ruin the Republicans, which it did, and they were willing to let millions suffer for the “Democrats’ greater good”, as they imagined it.

Likewise, this delay in taking care of the financially ruined and literally starving happened in Germany as well.

The US had sent a major business executive to Germany to turn around their ailing economy and hyperinflation, and he was doing so; but the good results came too late. Both the Nazis and the communists were vying for control, and the balance shifted in a single election to the Nazis. But it could have just as easily shifted to the communists.

The US executive succeeded in fixing Germany’s currency problem and giving them a solid, gold backed new currency that was so stable that the Nazis kept it for almost the duration of WWII.

So now Greece faces a similar problem. The major parties have all agreed to top-down solutions, but the Greek on the street is not willing to wait.