Greek bank deposits fall by €70 billion

Mon, Mar 5, 2012, 00:00

Bank deposits in Greece have fallen by €70 billion since the start of the crisis in 2009, the finance minister said today.

The figure is an indication of the massive loss of confidence in the country’s economy as it repeatedly came close to bankruptcy.

Evangelos Venizelos said only €16 billion of the funds withdrawn from Greek banks was sent abroad, mostly to the UK. The rest was largely spent as families and businesses ate into their savings, or hoarded by households preparing for the worst-case scenario - a debt default or Greece’s exit from the euro.

“This money, if it existed in the banks, would allow for loans to be made to businesses, for the economy to move, for unemployment to be tackled,” Mr Venizelos said in an interview on Antenna Television.

He stressed the importance of restoring confidence in order to encourage the return of funds to the banks, insisting that a new bailout deal and a major bond swap designed to slash Greece’s overall debt will strengthen the financial sector.

Greece will learn this week what percentage of its private creditors will participate in the bond swap, known as the Private Sector Involvement, or PSI, an integral part of Greece’s second bailout without which the country could default.

“Many billions are kept in homes. They are, as we say, in mattresses or in boxes,” the minister said of the missing deposits. “Of course, others have been spent on taxes, for families to live, for businesses to survive.”

Two years of austerity, which have included salary and pension cuts and repeated rounds of tax hikes in return for billions in international rescue loans, have left Greece’s economy mired in recession.

With unemployment topping 20 per cent and nearly half of young people out of a job, thousands of small businesses have shut down and many families are surviving on whatever savings they might have had.

But with the possibility that Greece might default on its debts and ultimately have to leave the European Union’s joint currency, the euro, many depositors have also withdrawn their money for safekeeping elsewhere, either abroad or stashed in homes.

AP