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Wednesday, May 16, 2012 10:22 AM

Capital Flight From Greece Accelerates, €5bn in May, Exodus Even Hits Time Deposits; Fed, ECB, BOE, BOJ Balance Sheet Comparison

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Capital flight from Greece continues, €5bn in May, not counting orders to buy foreign bonds. The exodus now includes cashing out time deposits as reported by the Financial Times in Greek banks see steady deposits outflow.

Greek banks have seen a steady outflow of deposits this month, reflecting savers’ concerns over the failure of political leaders to form a coalition government and the prospect of another inconclusive election, which will be on June 17.

Athens-based bankers said withdrawals exceeded €1.2bn on Monday and Tuesday – 0.75 per cent of deposits – as President Karolos Papoulias failed in two final meetings with conservative, socialist and leftwing leaders to form a national unity government.

A senior Greek banker said the experience of the past few days “gives rise to concern that withdrawals may accelerate”. Another banker said: “We are seeing something very unusual, customers breaking their time deposits in order to withdraw funds.”

“The situation with the banks is extremely difficult ... there is no panic but there is great fear which could turn into panic and the resistance of the banks is very limited just now,” Mr Papoulias told the political leaders on Sunday, according to a transcript of the meeting released by his office.

The president cited a briefing by George Provopoulos, the central bank governor, who told him that withdrawals last week reached €700m, excluding funds used to buy German bonds and other foreign securities.

One of the Greek bankers said that since the end of April, deposits had been reduced by some €5bn, including orders to buy foreign bonds and securities.
Why anyone would have even a cent in Greek bank accounts is a complete mystery. Certainly the smart money left long ago.

Here are a few charts courtesy of Steen Jakobsen, chief economist at Saxo Bank in Denmark.

Demand Deposit Flight: Greece, Italy, Portugal, to Germany

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ECB Deposits

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Central Bank Balance Sheets as Percent of GDP

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Mike "Mish" Shedlock
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