By Anna Doga
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Deposits in Greece’s battered banking system increased by two billion euros in December, although sector analysts pointed to mostly circumstantial reasons for the development, factors usually associated with the end-of-the-year period. Another half a billion euros was added, overall, to deposits in November 2016.
The end of 2015, which was an “Annus horribilis” for the country’s banking sector and economy, recorded deposits of 123.4 billion euros in Greek banks, with the figure up to 127 billion euros at the end of this year.
Although the trend is upward, the actual increase in deposits is judged as unsatisfactory, given the significant losses from withdrawn capital over previous months.
Continued economic uncertainty, especially strained relations with institutional creditors, along with exceedingly high tax rates and continued speculation over snap election merely exacerbated the already low confidence by depositors. According to banking circles in the Greek capital, indications of improved economic confidence in the wake of the first review of the Greek program last May, and the relaxing of capital controls, dissipated over the subsequent months.
What is also indicative is the fact that four months after the relaxation of capital controls, which abolished any restrictions on deposits of “new money”, the six billion euros that found their way back into the Greek banking system nevertheless failed to buttress the overall deposit base. The reason is that the new capital is continually being “recycled”, namely, through business transactions, instead of serving as a basis for long-term savings.
