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November 29, 2011 8:16 pm
The head of Greece’s central bank said on Tuesday that deposits had shrunk significantly in the past two months as the public withdrew billions of euros in reaction to mounting political tension.
George Provopoulos, the central bank governor, told a parliamentary committee that outflows from the banking system increased to €5.5bn in September and €6.5bn in October.
“These were two very bad months because of political uncertainty,” said Mr Provopoulos, who was presenting the bank’s first-half report on the Greek economy to the house economic affairs committee.
Outflows tripled compared with the same two months of last year when about €4bn left the system, according to figures published by the Bank of Greece.
Analysts said the withdrawals reflected specific economic and political events as the socialist government of George Papandreou, the former prime minister, struggled to meet budget targets before imploding over a failed plan to call a referendum on the latest bail-out deal.
“Insecurity rose because the question of Greece being forced out of the euro was mentioned publicly by the French and German leaders. People went straight to the bank,” said Yiannis Stournaras, director of IOBE, the Athens think-tank.
Opinion polls showed Greeks were increasingly worried the country might face a disorderly default and a return to the drachma.
Depositors withdrew another €1bn in the first week of November amid mounting tension as Mr Papandreou sought to find a successor to be premier.
But the trend reversed abruptly after Lucas Papademos, a former European Central Bank vice-president, was appointed to head a cross-party coalition government on November 10.
“The outflows stopped as soon as the new government took over. But so far we haven’t seen funds returning,” a central bank spokesman said.
Deposits in Greek banks have been eroding steadily this year amid a deepening recession. Total deposits amounted to €183.2bn at the end of September, marking a 25 per cent fall from the start of the crisis early last year.
The outflows have intensified a liquidity squeeze at Greek banks that has forced companies to repay debt and operate out of their own funds. Private depositors have moved money abroad, often to Greek bank subsidiaries in Cyprus and London.
The pace of withdrawals picked up in September after two new taxes were announced – a one-off “solidarity” tax based on last year’s declared income and a special levy on property.
In October, the mood deteriorated further amid a threatened rebellion by socialist lawmakers over the 2012 budget proposals.
“There haven’t been any visible signs of panic, like lines outside bank branches. But in recent weeks more people have moved funds to foreign bank branches in Athens or to a bigger Greek bank that gives a bigger sense of security,” Mr Stournaras said.
National Bank of Greece, the country’s biggest commercial lender, said on Tuesday it had seen a decline in deposits in the first nine months, but had increased its overall share of deposits in the system in the third quarter to 34.5 per cent.
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