(NaturalNews) Fearing a “Grexit” — a Greek exit from the European Union over differences regarding conditions surrounding a 2012 Eurozone bailout of the fabled nation — scores of Greek depositors have begun taking money from banks and running.
As reported by CNBC, the run on banks comes amid a “dramatic showdown in Brussels” between the newly elected left-wing Greek government and European creditors. Depositors are being spooked by the thought of a potential Greek default or worse, a pull-out from the EU and a return to the drachma, Greece’s former currency. The depositors are pulling out record amounts of cash.
As reported by CNBC:
The Bank of Greece and the European Central Bank won’t report official cash outflows for January until the end of the month. But sources in the Greek banking sector have told Greek newspapers that as much as 25 billion euros (US $28.4 billion) have left Greek banks since the end of December.
The same sources estimated that €900 million were taken from Greek banks on a single day recently — the day after talks broke down in Brussels, which stoked fears among Greeks that some sort of measure would be implemented to stop the outflow of euros. By mid-afternoon the following day, CNBC reported, deposits had shrunk to about €680 million (around $773 million).
Required to report outflows three times per day
“If outflows reach 1 billion euros, capital controls might need to be imposed,” Thanasis Koukakis, a financial editor for Estia, a conservative daily newspaper, and To Vima, a Sunday paper with some influence, told the cable financial news network.
Germany rejected Greece’s application to extend its current loan arrangement on February 20. The Greek government had sought a four-month extension as well as a renegotiation of the current bailout terms, which raised the specter of Athens falling short of cash in the near term. Under the current bailout terms, Greece was given about $272 billion (€240 billion) in exchange for adopting certain policies like austerity. The left-wing Syriza party ran successfully on ending austerity, which many Greeks have opposed.
The German decision came a day after the European Central Bank offered a two-week extension on a €68 billion emergency liquidity plan for Greek banks. A source close to the banking community told CNBC that banks in Greece have to report the outflows of cash to the ECB and the Bank of Greece three times per day, signaling a heightened level of concern among banking officials.
At present, the situation remains extremely volatile, as the Greek government and European creditors so far have not managed to come to an arrangement over financing measures regarding the bailout. Included in Greek’s proposal was language indicating that Athens did not intend to comply with the current bailout agreement. The loan formally expires February 28, CNBC reported.
The financial news site reported further:
Meanwhile, Standard & Poor’s issued a report [Feb. 20] that risks of contagion if Greece defaults and leaves the euro zone are less financially risky for the remaining countries in the euro zone than in 2012, the last time fears of a Greek exit from the euro zone surfaced.
Transferring cash out of the country
“All things considered, we believe that a Grexit would not lead to a degree of direct contagion that would drive other sovereigns out of the euro,” said Standard & Poor’s credit analyst Moritz Kraemer in a press release.
But there is overall uncertainty nonetheless, as some economists and Euro-analysts have suggested that a flight out of the euro could indeed spread to other nations on the brink, such as Ireland, Spain and Portugal.
As long as uncertainty reigns, Greeks are likely to continue taking cash out of banks, at least for the next few days. Some 70 percent of the outflows are actually coming from Greek corporate accounts. What’s more, most of that cash is being transferred quickly out of the country to bank accounts elsewhere in Europe, such as the United Kingdom and Switzerland.
CNBC noted that many individual Greek depositors were merely stashing their cash in their homes; not surprisingly, there has been a rise in home burglaries. [Editor’s note: Americans have also recently begun to hide more cash in their homes.]
ABC News is reporting that, as uncertainty rises and more depositors rush to banks, a crackdown on cash may be imminent; that report is here.
Natural News‘ continuing Greek financial coverage is here.