inescapably, sinking. Loan balance growth was
positive, albeit significantly slower, until January.
This year, though, it will turn negative. This will be
a great shock for all.
A shock that is equivalent to the great surprise
caused by the fact that, during the first year of the
crisis —which, admittedly, is expected to prove
much milder than the next ones— Greeks with-
drew savings of almost €10 bn to cover current
liabilities.
That is to say, living standards were sustained by
“burning the fat”.
So, what is going to happen from now on? It has
to be noted that this €10 bn figure is not a random
number. According to official data by the Bank of
Greece, deposits decreased last year by almost
€27 bn as compared to 2009. Banking sector
executives estimate that €15-17 bn fled the coun-
try following the unjustified fears caused during
the past 12-months in regard to deposit safety in
Greece.
The remaining €10 bn, though, did not share the
same fate, despite widespread erroneous beliefs
to the contrary. In other words, they never left the
country in pursuit of safer deposit-investment
havens. Instead, they remained in Greece, albeit
without avoiding withdrawal for reasons mainly
related to current consumer needs. And even if
there is, indeed, a hope that the €17 bn that went
abroad will one day repatriated, these €10 bn
must be completely written off, since they have
been consumed! What is going to happen,
though, in case this trend persists and becomes
more widespread during 2011, something that is
considered very probable under current circum-
stances? After all, the recession is not heading
towards a trough, but towards a climax.
Therefore, all possibilities are open. And this is
The amount of new
loans extended in 2011
is expected to be the low-
est of the past few
decades. More specifically,
it is estimated that total
loan balances for the year
will be reduced by almost
€
10 bn year-on-year. Last
time such a thing occurred
was in the early 1980s
”
“
exactly what Greek bankers fear. Because the
combination of reduced loans and reduced
deposits is rather explosive due to many reasons,
the most important being the operation of the
market itself. Deposits have always been the
main source of liquidity for Greek banks. It suf-
fices to say that this source has been traditionally
Trade with Greece
57
