Greek Bank Runs Herald Exit From Eurozone
from Western Journalism A fiat currency is only worth what people think it is worth. That goes for a country’s banking system as well. In Greece, where the Eurozone crisis started almost five years ago, it seems the Greek people do not have much faith in their banking institutions. The bank runs have started. Who knows where this current round of Greek tragedy will end? I can say it will not end well. Round and round she goes; where it stops, nobody knows. With new elections in Greece portending a worsening phase in the Greek debt crisis, Greeks can be forgiven for wanting their money in cash versus being held by insolvent institutions, only a phone call away from being used to support the government’s spending. The Syriza party, a leftist, anti-austerity group bent on opening the free-money spickets again in Greece, could possibly win the snap election called when the currency government failed in getting its candidate elected as president. Hence the bank runs. Zero Hedge reported that four of the major commercial banks in Greece have asked for help from the government through an emergency liquidity program.
What is relevant is that following yesterday’s report that two Greek banks had suffered sufficiently material deposit withdrawals to force them to apply for the unpopular and highly stigmatizing Emergency Liquidity Assistance program with the ECB, now the other two of Greece’s largest banks have also succumbed to reserve depletion after the Greek bank run appears to have gone viral. As Greek Capital.gr reports, now all four Greek banks have requested ELA assistance from the same ECB president who earlier today is said to have unceremoniously kicked out Greece from the ECB’s QE program.
It is highly likely that Greece will be forced from the Eurozone for not living up to the terms of their past bailouts. I would be angry too if I loaned you three-hundred billion euros and you refused to stop spending recklessly and reform you socialist economy. The major Eurozone powers are loath to set the precedent of cowtowing to newly elected leftist governments. Therefore, there may be a change made to the bailout requirements on the margin–but not strong enough a change to satisfy the Greek desire for free money. This final leg of the end of the euro as we know it will impact investor portfolios everywhere and is worth watching as it progresses.