Something unexpected happened on the road to the latest Greek "recovery": the local population no longer believes one is coming.
As Greece remains crippled by unprecedented capital controls preventing full access of the local population to its savings as a result of last summer's "referendum" and third bailout fiasco, and as Greek Prime Minister Alexis Tsipras braces for another round of tough negotiations with creditors, "savers are still reluctant to bet their money that this year’s talks will be less perilous for their country’s place in the euro area than 2015", as Bloomberg puts it.
A less diplomatic way of saying it is that while the bank run has been forcibly stopped, the bank "jog" continues.
According to the latest Greece’s central bank data released this week, deposit outflows continued in November for a second consecutive month, even as the nation’s lenders plugged their capital shortfalls, and strict capital controls put in place last summer capped withdrawals and money transfers abroad.
Deposits held by households and businesses in Greek banks fell close to a 12-year-low of 120.9 billion euros ($131.3 billion) in November, bringing total losses to a record of more than 43 billion euros, or 26.4 percent of total savings, in the last 12 months.
Back to Bloomberg which says that the "savers’ distrust may derail the government’s goal of lifting capital controls by the end of June. Reluctance to return deposits held abroad or under mattresses back to banks hinders the ability of lenders to provide credit to the economy, as the government struggles to lead Greece out of recession in 2016 after a turbulent year which pushed the country to the verge of leaving the euro area."
This was reflect in separate data also released by the Bank of Greece which showed that private sector deleveraging picked up pace in November, with outstanding loan balances dropping 2.2 percent from the previous year. Credit contraction “returned with a vengeance in July, continued unabated in August, slowed in September, yet picked-up speed again in October and November,” Athens-based Pantelakis Securities’ analysts Paris Mantzavras and George Grigoriou wrote in a note to clients on Thursday.
It appears that after letting down his constituency at every possible turn, the Greeks no longer have trust or faith in their prime minister.
Even as Tsipras assures savers that the country’s banks are now among the most adequately capitalized in Europe and there’s no risk of haircut or re-denomination for deposits, Greeks are still unwilling to bring their savings back, as the government remains at loggerheads with creditors over demands for additional pension cuts. Pension savings is among the main conditions for unlocking Greece’s next aid tranche and for debt-relief talks between the country and its euro-area creditors to begin.
Meanwhile, In an article in Sunday’s Kathimerini, Bank of Greece Governor Yannis Stournaras underlined the importance of Greece’s Parliament approving measures agreed with creditors for the third bailout, including reforms to the pension and tax systems, and warned of the risks of a new period of “backsliding.”
According to Kathimerini, failing to successfully complete a review by creditors in the coming weeks could trigger a new bout of instability that Greece is unlikely to survive, according to the central bank governor who served as finance minister from July 2012 to June 2014.
"A potential failure to complete the review would have a destabilizing effect, bringing back to mind the negative experience of the first half of 2015,” he wrote, referring to a period of high tensions and political and financial uncertainty.
Stournaras desperately pleaded that "it is the key for the return of deposits to the Greek banking system and for the launch of discussions with partners on a series of positive actions."
So far the population refuses to cooperate.
In what has become an annual ritual, it appears Greece is about to break, all over again.