The silent ongoing run on Greek banks

by on June 13, 2011 at 8:24 pm in Uncategorized | Permalink

The Greek banking system has a relatively low loan-to-deposit ratio of about 120%, well below Irish and Portuguese levels. But over the last year, deposits have fallen by €44 billion, and Greek banks have been shut out of the repo market, the interbank market and bond markets. That has left a €135 billion funding gap, mostly filled by the European Central Bank.

Here is more.  Here is a good Irish analysis.  And this:

Greece is now the lowest-rated sovereign in the world, having fallen below Ecuador, Jamaica, Pakistan and Grenada.

An ideal partner for a currency union with the Germans, no?

mulp June 14, 2011 at 12:15 am

If Greece wasn’t in the Euro zone, would German banks made loans based on the drachma?

Or would the loans been in Euro (or marks) so Greece running into fiscal and banking troubles would see the Greek debt explode from 200% of GDP to 500% to 1000% of GDP as the drachma plunges and it takes many more drachma to buy a Euro to service the debt held by Germans.

Scott Wentland June 14, 2011 at 1:25 am

A friend of mine in Germany told me that, “don’t let the Germans fool you. We like Greece and other dragging down confidence in the euro. It helps our exports [more than if we had our own currency]“.

That made me wonder which exort-oriented “cheap currency” strategy is cheaper: China’s currency policy or Germany’s policy of keeping Greece and friends on the euro and just bailing them out?

Jamie_NYC June 14, 2011 at 7:21 pm

Euro is quite high relative to USD. The PPP rate should be around par.

J Thomas June 16, 2011 at 7:50 am

That made me wonder which exort-oriented “cheap currency” strategy is cheaper:

There’s s typo here. I’m pretty sure I know what you meant, but I just realised that in general “exort” could be either “export” or “extort”. Or possibly even “exhort”.

dirk June 14, 2011 at 2:50 am

We are going to see a bounce back in Greek bonds eventually. The revolution will not be televised. It’s a good time to buy Greece and short the USA.

Martin June 14, 2011 at 4:04 am

Where is George Soros when the euro needs another coup de grace from him? 20 years on and we’re still in the same…

NC June 14, 2011 at 12:46 pm

International banks in Greece which are suffering much less of a bank run because they are perceived as having a low risk of default. The bank run on shaky banks has little to do with the currency.

NC June 14, 2011 at 12:46 pm

…Greece which are less exposed to Greek debt are suffering…

TallDave June 14, 2011 at 8:29 pm

It’s fun to imagine how Greece would be doing if they hadn’t joined the euro.

It’s even more fun to picture the euro countries all sitting around telling each other “Hey, good thing we didn’t invite them.”

Epanechnikov June 15, 2011 at 10:39 pm

Now have a look at these:

http://krugman.blogs.nytimes.com/2010/02/09/anatomy-of-a-euromess/

http://img38.imageshack.us/img38/9792/balanceoftrade.png

Does Germany really want to share the same currency as Greece and Spain? I guess yes

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