Greeks Spooked by Debt Clashes Put Cash Under Bathroom Tiles

by Maria Petrakis

(Bloomberg) -- Georgios Karavelas drives a taxi in Athens and for the past month has been a silent witness to what ordinary Greeks are doing with their cash.
One passenger, he said, told someone on his mobile phone that he’d withdrawn 25,000 euros from the bank, taken it home, worked loose a tile in the bathroom and stashed the money there. Another took the cash to his village and buried it in the garden. Yet another fashioned a small safe box in the air-conditioning unit on his balcony.
“I can’t fault these people,” said Karavelas, 37. “They were obviously people who had worked hard for their money, with families and jobs, not oligarchs.”

Withdrawals from Greek banks may have exceeded 15 billion euros ($17.2 billion) in the run-up to the elections that catapulted Alexis Tsipras and his anti-austerity Syriza party to power, including at least 11 billion euros in January, according to four bankers citing
preliminary data. Tensions between the new government, which won on a platform of debt relief, and Greece’s creditors, including Germany, may keep up the pressure.
“Talks with the creditors is going to be a protracted process so you can’t rule out more pressure on deposits,” said Wolfango Piccoli, managing director at Teneo Intelligence in London. “There is plenty of uncertainty and that can make depositors nervous again.”
Greece’s bailout program ends on Feb. 28 and failure to come to an agreement with the troika of lenders from the European Commission, International Monetary Fund and European Central Bank could leave the country without funding to repay billions of euros in debt due in the coming months. Germany is prepared to wait until April or May, when Greece hits a cash crunch to strengthen its bargaining position, a person familiar with the matter said.

‘Bank Marathon’

The uncertainty is having an effect on the nation’s banks. Tsipras’s pledge to renegotiate Greece’s debt sparked a more than 37 percent selloff in the FTSE/Athex Banks Index in his first week in office. While the shares have since recovered as Tsipras and his government have toned down their earlier statements, worries about Greek banks linger.
An outflow of deposits means they must rely more on ECB funds or so-called ELA funds via the Greek central bank, which needs ECB approval. The ECB will review the Greek central bank’s emergency line today, and can order it to be shut off if it deems it inappropriate. The review procedure takes place every two weeks.
The deposit outflows in the walk up to the elections would rival banks’ losses in 2012 when back-to-back elections in May and June fanned fears Greece would leave the euro.
“The story of the Greek deposits is not one of a bank run but a bank marathon,” said Andreas Koutras, a partner at In Touch Capital Markets Ltd. in London. “The smart money is long gone and there are few accounts with more than 100,000. The true barometer of fear is the amount of hard cash that is withdrawn, not how much is transferred outside Greece. This has gone up the past two months.”

Greek Trauma

Five years of wage and pension cuts extracted from successive Greek governments amid political and social upheaval in return for 240 billion euros of loans to stave off financial collapse has had a dramatic impact on the nation’s pocketbooks.
In Dec. 2009, the outstanding balance of deposits in banks was 237.5 billion euros, compared with 160.3 billion euros at the end of 2014, the latest figure from the central bank.
The figure plummeted to 150.6 billion euros at the end of June 2012 on fears Greece would leave the euro. In May and June that year, 15 billion euros in deposits fled the country’s banks, central bank data shows.
More recently, Cyprus, long considered a banking haven, was forced to seize almost half of all deposits of more than 100,000 euros at the country’s two largest banks in return for a 10 billion euro financial rescue, the first time such a tactic had been used in the euro zone.

‘Under Mattresses’

In Feb. 2012, then Greek Finance Minister Evangelos Venizelos said that of the 65 billion euros of deposits lost since Dec. 2009, only 16 billion euros had moved outside Greece, with 35 percent of that amount going to the U.K.
“The rest is either here in Greece, or has been taken abroad without a banking transaction,” he said. Greeks have taken out their deposits to invest them “in bonds of other countries, jewels, artwork, gold, put them in safety deposit boxes and, many, unfortunately are holding their deposits at home, under mattresses.”
On Jan. 30, five days after Tsipras’s election, the nation’s banks found themselves busy again. This time for a different reason: it was pay day, when pensioners and wage-earners get their monthly wage and pay their bills.

No Money

The teller at National Bank of Greece SA leaned forward to tell one customer something he’s noticed over the past few days.
“Had you come in last week, without warning, I wouldn’t have been able to give you so much cash,” he said in a low voice to the client withdrawing 20,000 euros. “We didn’t have the money.”
He said customers coming in to withdraw funds ahead of the election were for the most part older Greeks worried about their savings, removing cash and stashing it in safe deposit boxes. Another favorite for an older generation of Greeks is to buy gold sovereigns from the central bank.
Karavelas, the taxi driver, said he commiserates with his clients even though he has little to worry about.
“I don’t have deposits,” said the father of two who still has his savings in the bank. “I have about 1,000, 2,000 euros in the bank and that’s for my children.”