Greek banks may be nearing complete collapse
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(Money Watch) There are indicators that the run on Greek banks is already over, leaving many institutions near complete collapse. Depositors have pulled out a record amount of money in the last 10 days and there are reports that the ECB is no longer willing to lend to either them or the Greek central bank, which is also in a precarious situation.
Since May 6, depositors fearful over a Greek exit from the Euro have taken more than $6.42 billion out of the nation's banks, with $898 million coming on Monday alone. May 6 was the day of the last round of Greek elections where anti-bailout parties received most of the votes cast. Monday was the deadline for Greece's political parties to form a government. Their failure to do that means a new round of elections will be held on June 17.
Why Greece will and should default on its debtsWhat will happen if Greece leaves the Euro?
What could push Greece to exit the euro?
Before the May 6 election, Greece's banks had been seeing an increase in deposits. Roughly $2.5 billion had returned to the banks in March and April after international lenders agreed to provide $51 billion of funding to recapitalize the banks. Prior to this run of withdrawals, Greek banks had lost between 25 percent and 30 percent of their deposits since 2009.
The European Central Bank is reportedly refusing an increasing number of liquidity requests from Greek banks. According to reports in the Dutch financial newspaper Financieele Dagblad, the ECB has cut the amount loaned to Greek banks by more than half. At the end of January, the ECB had given Greek banks $93.75 billion in liquidity support. The ECB move came about because Greece has yet to use $32.11 billion of the money it was given to recapitalize the banking system, according to the paper.
Greece's banks are now believed to collectively owe about $128 billion more than their assets are worth, according to the Financial Times.
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The Death of Greece was Self Inflicted Socialism.
The high union wages, short work weeks, long vacations, early retirement, with an appetite for more than they could afford, and continued to barrow to add to old debt , and spend like they did not plan on paying it back. THE END
Sorry free market capitalism is equally problematic
Try again askagain
They LIED about Greece's finacial status and with the assistance of Goldman Sachs, hid their debt before entering the EU !
Let them drown in debt and the bankers / politicians be subject to lynch mob justice! ***Scored Earth***
Germany created World War 2 because they were forced to pay reparations for World War 1. The forced payments i.e., austerity, paved the way for an ultra-nationalist, anti immigrant socialist reformer into power. Hitler!
Now Germany has pushed so hard on Greece that they are on the verge of economic collapse and guess what. They have elected what kind of leaders?
You guessed it!
the real issue now is whether the ecb will refuse to let the greek central bank finance the run on the greek banks. the greek cb should be able to provide financing via overnight emergency liquidity assistance versus collateral manufactured in collusion between the cb, the banks and the greek govt (basically govt-guaranteed circular lending between the banks). this financial assistance can be vetoed by the ecb via a 2/3 majority vote. but that means the piigs have a blocking minority. i don't think any piigs govt will want to set the precedent of forcing greece out of the eurozone (which is what cutting off liquidity to the banks in the middle of a bank run would mean). especially not at a time when the greek govt has not actually defaulted on its debts or rejected the austerity programme (yet). that would be a highly political decision, and the ecb does not do politics. what's more, a decision to pull the plug would certainly be a lehman-like moment in terms of potential consequences and the message it sends to the markets.
as far as i can see, if the bank run continues to accelerate, it has to be financed by the ecb, meaning the ecb's exposure to the eventual greek euro exit will grow bigger and bigger by the day, due to the resulting target2 claims of the ecb on the greek central bank, and due to the greek cb's printing and distribution of euro banknotes (which become the rest of the eurozone's problem once greece leaves the currency). i wonder whether the greek cb has used its access to euro banknote printing presses to stockpile banknotes in advance. i wonder whether greek citizens have already made arrangements with friends and family overseas to look after their savings. certainly everyone in greece has had a lot of time to prepare for this moment.
that is how easy and fragile a Nations economy is.
The United States Debt Load is already past the tipping point,
and if we do not Cut the Size and Scope of Government soon, to fit the
Revenue base with no disasters to pay for, we may well be on the same path.
The only hope is real public sector JOBS,
not the Government subsidized jobs that die when the subsidy stops.
It's not difficult to find these facets to the issue either...