Charting Greece's Draining Coffers
When Dutch Finance Minister Jeroen Dijsselbloem raised the possibility that Greece might need to impose capital controls in a radio interview last week, it seemed like a crazy indiscretion. Why would a senior member of the euro establishment effectively tell people "Hey, we're considering locking your money inside the country, so you might want to get your euros out while you still can," and risk accelerating outflows from the country's already enfeebled banking system?
And when the European Central bank decided yesterday to grant more than 1 billion euros ($1.1 billion) of extra funds to Greece's banks, it was hard to divine the motivation for the altruism. Was it a carrot to incentivize the government to get serious about meeting the demands of its creditors? Or was it an emergency infusion, acknowledging that Greece is fast running out of money as well as time?
The following chart, based on data just released by the Bank of Greece, hints strongly at the latter explanation:
So the Greek banking system had just a bit more than 140 billion euros at the end of February. That's down almost 15 percent since the end of November, suggesting bags of capital are fleeing the country as fast as their little legs can carry them. And while extrapolation is an imperfect science, taking the trend from November and running it to the end of this month suggests there could be as little as 133 billion euros left at the current pace of withdrawals, which would be the lowest in more than a decade:
So the reason Dijsselbloem is talking about capital controls may be because the authorities are mulling last-resort, worst-case scenarios as the banking system bleeds out. And the reason the ECB has suddenly become more accommodative might not be a gesture of friendship to Greek Finance Minister Yanis Varoufakis; it might be because its lender-of-last-resort duties are compelling it to act. Today's figures, though, suggest Greek depositors are voting with their bank balances on the increasing risk of Grexit.
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