Will there be a run on Greek banks and if so what would that mean?

May 16, 2012 7:28 AM

How likely is a run on Greek banks? What would the short to medium term effect of a run be on Greek businesses? Would it effect different types of businesses differently?
posted by digitalprimate to Work & Money (8 answers total)

How likely is it? Its already going on.

I would assume any prudent greek businesses is running from the banks as well. Get your Euros in a safe country before they become drachma.
posted by JPD at 7:32 AM on May 16, 2012 [1 favorite]

The WSJ is reporting that Greek depositors withdrew EUR700M (USD898M) on Monday alone. So, a large-scale bank run does not seem unlikely.
posted by Admiral Haddock at 7:33 AM on May 16, 2012

Turns out the Greek Central Bank is now claiming that number is from elections on the 6th. Either way, were I Greek I'd be putting any cash I had outside of Greece ASAP. The payoff is so asymmetric - either Greece defaults and exits and I've preserved a tremendous amount of wealth or there is a solution and I'm out the time and fees it took me to set up the account.
posted by JPD at 7:53 AM on May 16, 2012

In the event of a Greek withdrawal from the EU it will be time to tot up some figures on where the money has gone. If this happens then I expect that richer EU members - the Germans in particular - are going to be surprised:

Here is a slightly simplified account of how this works: when someone takes 100 euros from a Greek bank and transfers it to the perceived safety of a German bank (which has been happening quite a lot), that Greek bank gets the 100 euros from the Greek central bank, which in turn borrows the money from the Bundesbank.

Here is the thing. As of March of this year, the German central bank had 644bn euros of claims on other central banks, equivalent to a quarter of German GDP. These are euros owed to the Bundesbank by the central banks of the economies where there has been the greatest capital flight, names those of Greece, Italy and Spain.

So if all of a sudden, Greece and Italy and Spain decided to revert to their national currencies, it is an interesting question how much (if any) of the 644bn euros the Bundesbank could get back.

BBC Article by Robert Preston.
posted by rongorongo at 7:59 AM on May 16, 2012 [1 favorite]

The bank runs that we are watching right now in Greece are shocking, but they are only just the beginning. (Warning : via Alex Jones)
posted by adamvasco at 8:01 AM on May 16, 2012

it should be obvious that if you have euros and are facing the prospect of those euros turning into drachma/lira/ ect that you will be very wary about letting that happen. With respect to alex jones, he is an idiot - but you don't need to be a crazy to work out that if depositors are taking out $700 million a day from your banks you have a huge problem.

From my own, flawed, perspective - I don't see a good way out of this - Greece has already lost 10-15% of GDP from its 2008 levels, and frankly, the level of government fraud and rent seeking that was occuring before hand suggests to me it will lose an awful lot more before then. Greek democracy at this point is impotent, all the greek people can do for themselves is make things worse... the potential relief exists in berlin (and to a lesser extent paris) - it is up to the merkel-set to decide whether they want to finance greek (and by extension Portuguese and Italian) corruption or pay it off and suffer domestically for another 10 years of euro crisis.
posted by Another Fine Product From The Nonsense Factory at 8:41 AM on May 16, 2012

Krugman says "What’s happening now is a “bank jog” — Greeks are pulling euro deposits out of banks fairly rapidly, but not quite fast enough to be called a bank run."

It seems to me that if people are rapidly "jogging" for the exits, the odds of those joggers breaking into a run is pretty high.
posted by diogenes at 8:47 AM on May 16, 2012 [1 favorite]

diogenes is pretty right in what he says. This has become a self-perpetuating crisis: the more news about bank runs, the more people will withdraw money, the more the news will cover the story...rinse, wash, repeat until the banks are closed.

I would want my money in cold, hard, cash at this point in the Greek banking crisis. At the very least you will have Euros that will be worth a good 50% more than the inevitable re-introduction of the drachma. However, hold your money in the bank and while it will likely be insured (to a point), it will be worth a lot less on the day the Euro is dropped.
posted by tgrundke at 9:51 AM on May 16, 2012