|
|
Barely a year ago, Greece’s banks were on a roll. They had raised a combined €13bn in fresh equity to sustain their recovery and had renewed access to debt markets to fund lending. The wheels to power the country’s economic rebound were looking pretty well oiled.
But bullish investors who backed all that fundraising ignored two uncomfortable truths. One should have been obvious — that Greece’s debt burden was inherently unsustainable and would inevitably come back to haunt politicians and banks alike until it was properly restructured. The other might have been predicted, too — that after six years of brutal recession and austerity, the population would rebel and elect a radical government.
Amid the acrimonious war of words that has developed between that government and Europe’s bailout negotiators over recent weeks, there has been an understandable focus on the victims of this crisis — ordinary Greeks, pensioners, the unemployed.
But unfashionable as it is to assert, the banks are also deserving of sympathy. For, unlike so many of the crises that have taken hold across Europe, from Spain to Cyprus, Greece’s banks have not been the cause of the country’s problems. They are the pawns caught in the middle of a deadly board game.
While a year ago they might have looked like the transmission mechanism for recovery, now they risk becoming the trigger for Greece’s chaotic exit from the eurozone.
Last week, Greek companies and individuals grew more nervous about the country’s increasingly hostile relations with the rest of the eurozone, accelerating their withdrawal of cash from bank accounts.
This is nothing like the sudden bank runs that afflicted other countries — the UK’s Northern Rock in 2007, or the Icelandic lenders a year later. But the long slow flight of cash from Greek bank accounts has turned from a stroll to a rapid jog.
During the previous period of extended stress in Greece, between 2010 and 2012, the tally of deposits in the country’s banks shrank from about €235bn to €160bn — an average daily withdrawal rate of about €100m.
By the end of last week, the rate of withdrawals had jumped to nearly €1.5bn a day — more than 1 per cent of the total — according to bank bosses. Deposits in the system are reckoned now to have fallen below €130bn, a quarter below where they were when the Syriza party was preparing to take charge of the country six months ago.
The shrinking deposit base has left the banks increasingly reliant on so-called Emergency Liquidity Assistance, the crisis funding scheme financed by the European Central Bank via the Greek central bank. Greece’s banks now have about €85bn from the ELA and a further €35bn of direct ECB liquidity.
But such is the pace of withdrawals, there is no slack in the system. Even after a fresh injection of nearly €2bn of ELA money on Friday, bankers said they only had sufficient funds to last another day or so. They opened their doors on Monday. But if the day’s political negotiations with eurozone leaders fail to result in a deal on Greece’s debts, bankers have drawn up contingency plans to close for an emergency bank holiday on Tuesday. Capital controls would follow.
Full article on Financial Times (subscription required)