Savers across Europe are fleeing the continent’s debt crisis. In Europe’s most economically stricken countries, people are taking their money out of their banks as a way to protect their savings from the continent’s growing financial storm. Worried that their savings could be devalued, or that banks are on the verge of collapse and that governments cannot make good on deposit insurance, people in Greece, Spain and beyond are withdrawing euros by the billions — behavior that is magnifying their countries’ financial stresses. The money is being hoarded at home or deposited in banks in more stable economies.
In Greece and Spain, two of the hardest-hit by the debt crisis in the 17 countries that use the euro, savers and businesses are already pulling money out of banks. They are either worried that their money could be converted into a new currency at a much lower value or that their bank might be on the verge of collapse.
It is a steady bank “jog” at the moment, rather than a full-bore run, but it threatens to undermine the finances of those countries’ already-stressed lenders. And if it does turn into a full bank run, it could hasten financial disaster in Europe and help spread turmoil around the world.
Since the Greek debt crisis broke in late 2009, deposits have fallen by 30 percent, as savers have slowly pulled about 72 billion euros (US$90.24 billion) from local lenders, with total household and corporate deposits standing at 165.9 billion euros in April, according to the latest data from the Bank of Greece.
Spanish deposits have fallen about 6 percent over the past year. They dipped suddenly in April by about 3.1 billion euros, or 1.8 percent, to 1.624 trillion euros as problems with the country’s troubled banks started to grow to alarming proportions. This is despite the fact that deposits are guaranteed by the government up to 100,000 euros across the eurozone.
Spain’s financial turmoil quickly worsened late last month, when the country’s second-largest lender announced it needed capital of 19 billion euros to stay afloat. Bankia denied reports of a rush by its customers to withdraw, but the bailout scared Spaniards, who had assumed their money was safe.
Bankia client Rosa Monsivais panicked and decided she had to move her savings from Bankia to one she thought would be safer. She chose a foreign bank with Spanish operations, the Dutch owned ING bank. It took longer than she thought, leading to anxious days until she knew her money was in her new account.
“It scared me a little. I took all my money out and put it in ING,” said Monsivais, a 41-year-old graphic artist, who would not say how much money she moved. “But it took a full week to do this kind of transaction, I was reading the newspaper each day and it worried me.”
The money across Europe is headed different places. Some has simply been withdrawn and spent out of urgent need as people lose their jobs because of recessions. Some is winding up in bank accounts or invested in countries that are more stable, such as Germany. The rest is being invested in property or bonds being issued by other eurozone countries. In the UK, the eurozone crisis was seen as one factor pushing up central London house prices, according to Knight Frank, a real-estate agency dealing in high-end property.
“While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year — those who had the funds to buy have done so — we are now seeing a noticeable uptick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market,” the company said in its Prime Central London Index report.