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Economics, Governance

Greeks pull $1 billion out of banks and stock up on food prior to destiny-shifting election

June 13, 2012 – ATHENS – Greeks pulled their cash out of the banks and stocked up with food ahead of a cliffhanger election on Sunday that many fear will result in the country being forced out of the euro. Bankers said up to 800 million euros ($1 billion) were leaving major banks daily and retailers said some of the money was being used to buy pasta and canned goods, as fears of returning to the drachma were fanned by rumors that a radical leftist leader may win the election. The last published opinion polls showed the conservative New Democracy party, which backs the 130 billion euro ($160 billion) bailout that is keeping Greece afloat, running neck and neck with the leftist Syriza party, which wants to cancel the rescue deal. As the election approaches, publishing polls is now legally banned and in the ensuing information vacuum, party officials have been leaking contradictory “secret polls.” On Tuesday, one rumor making the rounds was that Syriza was leading by a wide margin. “This is nonsense,” one reputable Greek pollster said on condition of anonymity. “Our polls show the picture has not changed much since the last polls were published. Parties may be leaking these numbers on purpose to boost their standing.” The pollster said there was some consolidation, with voters turning to New Democracy and Syriza from smaller parties but the pool of undecided voters remained unusually large so close to the election and the result was impossible to predict. Both parties say they want Greece to remain in the single currency but Syriza has pledged to scrap the bailout agreement signed in March which has imposed some of the toughest austerity measures seen in Europe in decades. The European Union and International Monetary Fund have warned that Greece, which has only enough cash to last for a few weeks, must stick to the conditions of the bailout deal or risk seeing funds cut off.

CNBC Greek banks hemorrhaging: As Bloomberg’s Marcus Bensasson reports, citing Kathimerini, the Greek banking system has continued to hemorrhage deposits this month, amid uncertainty over the outcome of elections on June 17. “Many people are putting money in shares of mutual funds denominated in dollars because of the bureaucratic difficulty of taking money out of Greece, or are keeping cash at home, the newspaper said.” How much? “Deposits are leaving the banking system at a rate of 100 million to 500 million euros ($125 million to $625 million) a day, Kathimerini said, without specifying over how long a period that rate of outflow has continued.” Considering that the Greece banking system has about €170 billion in total deposits, this is roughly 0.3% of the entire deposit base fleeing each day – those who understand the nuances of fractional reserve banking get why this could be an issue. Putting this in the US context, which has over $8 trillion in various forms of deposits; this would be equivalents to about $25 billion getting withdrawn every day. –Zero Hedge

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