Greek bank deposits plunge most since nation joined euro

By Christos Ziotis and Marcus Bensasson

Greek bank deposits held by businesses and households fell in October by the most since Greece joined the euro amid uncertainty over continued financing for the country from the European Union and International Monetary Fund.

Deposits fell 3.7 percent to 176.4 billion euros ($235 billion) from 183.2 billion euros, the Athens-based Bank of Greece said in a statement on its website today. The 6.8 billion-euro drop is the biggest since the country joined the 17-nation currency bloc in January 2001.

European Union leaders agreed on a 130 billion-euro bailout package for Greece on Oct. 26 after inspectors from the EU and the IMF determined that a 110 billion-euro bailout in May 2010 package wouldn’t be enough to keep the country’s debt to a sustainable level. The European Commission forecast last month that Greece’s debt would reach almost twice the size of its economy next year.

“The outlook remains fragile and political and macro developments, as well as the depth of recession, will drive deposit evolution in the coming months,� Euroxx Securities SA research director Manos Giakoumis said in an e-mailed note.

Bank deposits by consumers and businesses have declined 33.2 billion euros, or 16 percent, since December 2010.

Bank of Greece Governor George Provopoulos told lawmakers on Nov. 29 that the deposit flight continued at the start of November after former Prime Minister George Papandreou called an aborted referendum on the terms of the Oct. 26 accord, roiling markets. Deposits stabilized after Lucas Papademos, a former vice president of the European Central Bank, replaced Papandreou on Nov. 11.

Greek bank reliance on ECB liquidity declined to 74.3 billion euros from 77.8 billion euros in September, the Bank of Greece said in a separate statement. Reliance on Emergency Liquidity Assistance stood at 36.3 billion euros, according to Bloomberg calculations.

Bloomberg News

Posted in:Economy, Investing  Tags:bank run, credit crunch, debt crisis, deposits, eurozone, Greece, Greek banks, Greek crisis, recession