Banks unable to finance the economy

By Yiannis Papadoyiannis

Greek banks are struggling to stay alive, according to observers, as the flight of deposits and their only marginal replacement by liquidity supplied from the Eurosystem are not allowing the local credit sector anything more than the mere serving of cash flow needs.

With deposits dropping to as low as 135 billion euros, the loan balance has exceeded 210 billion. This gap of nearly 80 billion euros is covered by the emergency liquidity assistance (ELA), leaving no space for banks to finance enterprises and households.

?The issue of loans that had restarted in 2014 has now suddenly stopped again due to the uncertainty and the decline in economic activity,? a senior bank official told Kathimerini.

He added that in practical terms the current cash flow only serves the needs of everyday transactions of citizens and corporations.

?As things stand it is simply impossible for us to finance the economy as we can only marginally cover the cash needs of our clients,? he noted.

In the period from December to January deposits shrank by a total of 14.6 billion euros, while banks estimate that the decline last month amounted to some 5 billion euros, taking the sum of bank deposits to levels unseen since 2005.