Greek Banks: Why the Money’s Running Out

Pictures of Greeks queuing outside banks on Wednesday have added to the pressure on the country’s far-left government to capitulate to its creditors’ demands.

After a combination of disastrous borrowing and years of austerity, the country’s fiscal situation has become so dire that its banks are shut, citizens can only withdraw 60 euros ($67) a day from ATMs—which are reportedly running out of 20 euro notes—and there are even concerns that pension funds will not have enough euros left to pay pensions.

“The pressure on the banking system is already great and the message to account holders (voters) is already crystal clear. Time has almost run out,” strategists at Rabobank warned in a research note on Wednesday.

Capital has hemorrhaged out of Greek banks—but the true effects of this have not yet been felt, because the European Central Bank (ECB) has provided an emergency backstop of funding for financial institutions, known as the Emergency Liquidity Assistance (ELA).

But this is could be under threat, with the ECB’s governing council expected to meet in Frankfurt on Wednesday evening to make a call on whether to raise, keep at the same level or cut the ELA.

If Greek banks are seen becoming insolvent, the ELA funding, which has already been capped, could be cut.

Alternatively, the ECB could raise the “haircut” made to Greek government bonds and government-backed assets presented as collateral for funds, as the country is now in arrears over its debt to the International Monetary Fund.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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