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Depositors flee from Greece as recession returns

13 May 2015 18:02 (UTC+04:00)
Depositors flee from Greece as recession returns

By Bloomberg View

The cost of the stalemate between Greece and its creditors is apparent in gross domestic product figures today showing the Greek economy slumped back into recession even as many of its euro zone peers enjoy a burst of growth. Even more worrying for the nation (and any of its lenders who still hope to get repaid in full) is evidence that capital is fleeing at an accelerating rate.

QuickTakeGreece's Fiscal Odyssey

Deposits at Greek Banks look to have dropped by a staggering 20 percent since September; Bloomberg's Athens bureau chief Nikos Chrysoloras reports that outflows quickened to 7 billion euros ($7.8 billion) last month, which would leave just 131.6 billion euros in the banking system:

As a result, the European Central Bank has increased the emergency liquidity assistance it's providing to Greek banks by 35 percent since the start of February. At some point, the ECB is likely to run out of patience that a contingency program designed to temporarily ease distress is instead the only thing standing between Greek banks and insolvency:

The Greek economy shrank by 0.2 percent in the first quarter, extending the 0.4 percent contraction in the previous three months. Last week, the European Commission slashed its 2015 Greek GDP forecast to 0.5 percent from 2.5 percent previously:

Greece's relapse contrasts with the 0.4 percent first- quarter expansion in the euro region as a whole, led by a jump of 0.9 percent in Spain and reinforced by France's surprise 0.6 percent growth and Italy's 0.3 percent showing. As I've written previously, a country with debts equal to almost 180 percent of GDP that's struggling to grow is a country that's unlikely to be able to pay its way.

Some 6,000 miles from Athens, a banknote printing company called Fortress Paper in Vancouver, Canada, has seen its shares climb a staggering 67 percent this month on speculation it has a contract with the Greek government to turn on the printing presses if the country decides it needs a new currency.

Fortress said Tuesday it doesn't know why its shares are climbing, and Chief Executive Officer Chadwick Wasilenk declined to comment when a Bloomberg reporter cornered him. But with Greek officials reduced to withdrawing money from the country's account at the International Monetary Fund to pay their debts to the IMF -- robbing Christine Lagarde to pay Christine Lagarde, if you will -- the euro zone looks increasingly like a club Greece shouldn't belong to.

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