Greek January Bank Deposits Fall Amid Bailout Brinkmanship

Greek bank deposits held by businesses and households fell the most in three months in January as the country struggled to secure a second aid package to avoid economic collapse.

Deposits dropped to 169 billion euros ($226 billion) from 174.2 billion euros the previous month, a fall of 3 percent, according to a statement released by the Athens-based Bank of Greece on its website today. Deposits declined 35.4 billion euros, or 17 percent, in 2011.

Prime Minister Lucas Papademos said in January that talks weren’t easy as he pushed to reach agreement on the terms of a debt swap with private creditors and on additional austerity measures demanded by the European Union and International Monetary Fund in return for a 130 billion-euro bailout.

“The overall uncertainty and the recessionary environment played their role,” Athens-based National Securities analyst Panagiotis Kladis said in an e-mail. “I think the second bailout program agreed with the EU should result in more confidence and thus to a moderation of deposit outflows.”

Finance Minister Evangelos Venizelos on Feb. 24 called on Greeks to bring their savings back to the nation’s banks after the EU and IMF pledged to grant the country the second bailout.

Greece committed to 3.2 billion euros of extra measures and negotiated terms for the biggest debt restructuring in history to secure the financing, a move that Venizelos told lawmakers in Athens yesterday will “steer the ship to a safe harbor.”

Cost Covering

Small Greek businesses pulled out deposits over the last six months to cover operating costs as revenues fell, according to 74 percent of 1,200 enterprises polled by Marc SA for the Small Businesses Institute at the Hellenic Confederation of Professionals, Craftsmen and Merchants.

Greek bank lending to households and businesses fell an annual 3.3 percent in January, compared with a 3.1 percent decline in December, according to an e-mailed statement from the Bank of Greece (TELL) today.

Of the 65 billion euros of deposits lost since Dec. 2009, only 16 billion euros has moved outside Greece, with 35 percent of that amount going to the U.K., Venizelos said.

“The rest is either here in Greece, or has been taken abroad without a banking transaction,” he said. Greeks have taken out their deposits to invest them “in bonds of other countries, jewels, artwork, gold, put them in safety deposit boxes and, many, unfortunately are holding their deposits at home, under mattresses.”

To contact the reporters on this story: Christos Ziotis in Athens at cziotis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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