Greek Banks Losing Deposits

The European media is reporting that Greek banks have lost approximately 1.5 Billion Euros in the past two days, money taken out of accounts by Greek account holders.
Greeks are trying to secure their money before anything happens to force Greece out of the Eurozone, something that is more and more seen as a real possibility. So far, there has not been a “run” on Greek banks, but authorities in Athens and Brussels are watching the situation for signs of panic.
At the same time, the European Central Bank has stopped lending money to certain under-capitalized Greek banks. This is thought to be behind some of the recent bank account withdrawals. However, the ECB has stated that the under-capitalized banks are in the process of being re-capitalized by a special fund set up in the Eurozone for that purpose, and as soon as the process is complete, the ECB will again begin to lend to these banks.
Reality on the ground, however, may show a different situation. At least four Greek banks are reported to be operating with negative capital and are being supported by the Greek of Greece, which is, in turn, being supported by the ECB.
In addition, the failure to form a government after the recent parliamentary elections has left Greece with a caretaker government to handle day-to-day operations until a new election is held on the 17th of June.
The ECB is reported to have decided that the electoral stalemate makes the possibility of the needed re-capitalization of the banks almost impossible.
And, the ECB needs to provide 18 Billion Euros to Greece soon so that Greece can pay its creditors the latest installment on the debt Greece owes them. If the ECB does not provide the money, Greece would be in default and there would be “disastrous” consequences, including a declaration of bankruptcy by the creditors that would automatically, in theory, force Greece out of the Euro as its national currency and might even force Greece out of the European Union.
What is interesting in all this chaos is that a majority of Greeks want to remain in the Eurozone but they vote for parliament members that do not want to follow the Eurozone rules for austerity required to put Greece’s fiscal mess in order. But, a poll last week shows that 48% of Greeks are beginning to believe that an exit from the Eurozone is inevitable.
Even some members of the caretaker government have said that Greece will be forced to leave the Eurozone and return to the Greek Drachma, but a greatly devalued Drachma.
So, dear readers, it is easy to see why Greeks are withdrawing Euros while they still can. These Euros will be worth much more if exchanged in an open market for Drachmas or other currencies, instead of being exchanged automatically by the banks under orders from the Bank of Greece after a default and exit from the Eurozone.
Since January 2010, some 72 Billion Euros have been withdrawn from Greek banks. Analysts say this is partly because Greeks need the money to live on, but it is also because they fear losing money if there is a default and their new Drachmas are valued at a very low rate in relation to the Euro.
Add to this the rumor mill that is churning ever faster in recent days in Greece and everywhere in Europe and you have an explosive situation. That the Euro has fallen against the US Dollar from 1.32 to 1.27 in the past few days is further proof of the troubles brewing in the Eurozone, with no real solutions being offered.