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Monday, March 23, 2015 11:33 AM

Plotting the Trust (or Lack Thereof) in Greek Banks; Greece Capital Flight in Pictures

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Greece Capital Flight in Pictures

Using Target2 Imbalances as a measure of capital flight and trust that Greeks have in their banks, here are two charts that pretty much tell the full story.

Greece Target2 Imbalance January 2014 to February 2015

Between October 2014 and February 2015, over 52 billion euros have fled Greek banks. Go back to June when things appeared to be healing and capita flight is about 60 billion euros.

Greece Target2 Imbalance Every February Since 2008

Charts created with data from Euro Crisis Monitor.

Target2 Discussion

For a discussion of Target2, what it means and how it works, along with a discussion of who is really to blame for the crisis in Europe, please see From ZIRP to NIRP: Virtues of Germany vs. the Vices of Greece; What About "Speece" and Gold?

The record Target2 deficit for Greece was 109.315 billion euros in November of 2011. The Greek Target2 deficit exceeded 100 billion euros for 14 of 15 months between September of 2011 and November of 2012.

On July 26, 2012 ECB President Mario Draghi said the ECB was “ready to do whatever it takes” to preserve the single currency. “Believe me, it will be enough,” said Draghi.

Confidence in the euro resumed. With a bit of a lag, confidence in Greek banks also returned.  Between February of 2012 and June of 2014 nearly 77 billion euros flowed back into Greek banks.

Confidence in Greek banks waned with the rise of Syriza, accelerated ahead of the January 2015 Greek national election, then continued its decline following the election.

Runs on Greek Banks

The above charts nicely depict capital flight and the run on Greek banks.

On January 9, I commented Another Run on Greek Banks Begins; Get Out While You Still Can; Buy Gold

On January 25, 2015 I reported Syriza Trounces New Democracy; Greeks Stop Paying Taxes; Run on Greek Banks Escalates; Get Out!

Greeks held back paying taxes because they figured Syriza Alexis Tsipras would work out a new deal with the Troika and for Greek taxpayers. A new deal never happened, and the run on the banks continued.

In spite of the fact that Greek banks are in need of cash, the ECB has been very reluctant to provide it. See ECB Revokes Greek Bonds as Collateral; ECB vs. Novices; Brass Knuckles.

Greece Warns Merkel of ‘Impossible’ Debt Payments

Today the Financial Times reports Greece’s Leader Warns Merkel of ‘Impossible’ Debt Payments.

Alexis Tsipras, the Greek prime minister, has warned Angela Merkel that it will be “impossible” for Athens to service debt obligations due in the coming weeks if the EU fails to distribute any short-term financial assistance to the country.

The warning, contained in a letter sent by Mr Tsipras to the German chancellor and obtained by the Financial Times, comes as concerns mount that Athens will struggle to make pension and wage payments at the end of this month and could run out of cash before the end of April.

“Given that Greece has no access to money markets, and also in view of the ‘spikes’ in our debt repayment obligations during the spring and summer . . . it ought to be clear that the ECB’s special restrictions when combined with disbursement delays would make it impossible for any government to service its debt,” Mr Tsipras wrote.

He said servicing the debts would lead to a “sharp deterioration in the already depressed Greek social economy — a prospect that I will not countenance”.

Mr Tsipras was rebuffed in efforts to secure quick financing from either the ECB or eurozone lenders at Thursday’s Brussels meeting with Ms Merkel and a small group of other EU leaders — including French president François Hollande and ECB chief Mario Draghi.
No Cash for Greek banks

Adding fat to the Greece fire, Spain says No Cash for Athens Until Reforms in Place.
Greece’s cash-starved government will not receive any money from the eurozone rescue fund until all its proposed reforms have been implemented, the Spanish economy minister has said.

“We will see whether the list of reforms is comprehensive enough or not. [But] there will not be any disbursement before there is a real test that the reforms have been approved and implemented. That is the approach,” Luis de Guindos said in an interview with the Financial Times, dashing Greek hopes that the presentation of a new reform list alone could unlock fresh funds for Athens.
Politics Triumphs Over Rational Thinking

Spain could benefit from a rule change itself but fearing the rise of the Spanish anti-euro party Podemos, does not want to appease Greece in any way.

Recall that Podemos "Economic Manifesto" Calls for Debt Restructuring, Spain to Abandon the "Euro Trap"

For further discussion, please see Greecification of Spanish Politics and the Lies of Spain's Ministers.

I believe this foolish move will backfire in a big way in the Spanish national elections later this year.

Get Out While You Can!

If you have money in Greek banks, get it out now! I have been saying that for months, and the smart money is doing just that.

Mike "Mish" Shedlock

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