Greece Guarantees All Saving Deposits

Friday, October 03, 2008

Europe's banking crisis gathers steam with every new day. On Friday Greece announced that it would like Ireland guarantee all savings deposits regardless of their size.
According to The Telegraph,
Greek officials said the state would cover "all bank deposits, whatever the amount." The move follows the dramatic decision by Ireland this week to guarantee the deposits and debts of its six biggest lenders in the most sweeping bank bail-out since the credit crisis began.
"The whole of Europe will have to do same thing, otherwise Europe will have a split banking system," said Hans Redeker, currency chief at BNP Paribas. British banks are already facing a haemorrhage of deposits to Irish banks that now enjoy the AAA sovereign rating of the Irish state.
Greece has so far escaped attention as the financial storm breaks over Europe, but the economy is deeply unbalanced. A torrid credit boom has been allowed to run unchecked, leading to a current account deficit of 15pc of GDP -- the highest in the eurozone.
While property losses are modest so far, the Greek banks have run into trouble rolling over short-term debts after the near total closure of Europe's capital markets. The liabilities of the Greek banks are roughly €320bn euros.
The paper warns of more havoc down the road.
Governments across Eastern Europe were forced to issue statements on Thursday assuring depositors that their banks were safe. Traders said Ukraine is on the brink of a currency crisis.
Individual measures by national governments ahead of a crisis meeting of the leaders of Germany, Italy and the UK in Paris are a strong sign that French president Nicolas Sarkozy's initiative for a pan-European bailout fund will be a stillbirth as it is heavily opposed by Germany.
In Austria industrialists have also raised their voice in the interest of a limitless guarantee on savings. The plan is unlikely to be realized because Austrian banks are split into several sectors which already guarantee unlimited deposits within the respective sector.


Wikinvest Wire