Greece: Deposit Outflows Soar In Run-Up To Syriza Victory

Greek Deposit Outflows Soar In Run-Up To Syriza Victory (ZeroHedge, Jan 25, 2015):

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 Purchases of offshore money funds, one way for Greeks to invest their withdrawn bank deposits, spiked to very high levels this week.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

Bank of Greece

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.

2 thoughts on “Greece: Deposit Outflows Soar In Run-Up To Syriza Victory

  1. After some digging on the web and some financial sites, I was able to get the 28 nations and their debt levels, mostly for 2012……..only a few are kept up to date with US debt clock dot org. If you go to that site, click on world at the top left side, you will get the data from some nations. Some, like China, are outright lies, but most of the numbers jive from other financial sites……at least in the same general area of debt. Some sites work very hard to stay as accurate as they can. This is what I have found, so bear with me:
    All of these nations are EU members at least as of tonight.

    Austria: (2012) Debt:GDP is 74.6%
    Belgium: (World Clock) Debt:GDP is 99.6%
    Bulgaria: (2012) Debt:GDP is 17.9%

    Croatia: (2012) Debt:GDP is 52.9%
    Cyprus: (2012) Debt:GDP is 80.9%
    Czech Republic: (2012) Debt:GDP is 43.9%

    Denmark: (2012) Debt:GDP is 45.3%

    Estonia: (2012) Debt:GDP is 8.4%

    Finland: (2012) Debt:GDP is 53.5%
    France: (world clock) debt:GDP 249.6%

    Germany: (world clock) Debt:GDP 186.8%
    Greece: (world clock) Debt:GDP 211.8%

    Hungary: (2012) Debt:GDP 78.6%
    Ireland: (world clock) Debt:GDP 1068.1%
    Italy: (world clock) Debt:GDP 150.6%

    Latvia: ( 2012) Debt:GDP 39.2%
    Lithuania (2012) Debt:GDP is 40.8%
    Luxembourg (2012) Debt:GDP 18.4%

    Malta: (2012) Debt:GDP is 77%
    Netherlands: (2012) Debt:GDP is 68.7%

    Poland: (2012) Debt:GDP is 58.8%
    Portugal: (World Clock) Debt:GDP 221.7%
    Romania: (2012) Debt:GDP is 37.2%

    Slovakia: (2012) Debt:GDP is 48.6%
    Slovenia: (2012) Debt:GDP is 53.2%
    Spain: (World Clock) Debt:GDP is 165.5%
    Sweden: (2012) Debt:GDP is 38.6%

    UK: (World Clock) Debt:GDP is 389.4%

    This involves 500 million people……….
    What a mess.

  2. It appears the left is gaining power, not the neo-Nazis as one post said. That is good for the country, bad for greedy guts.
    A left movement will dump the euro and look out for Greece……follow Iceland and tell the greedy gut bankers to go to hell.

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