ECONOMY

Bank interest rates are soaring

The market is on the verge of a credit crunch as liquidity is close to drying up and banks are paying dearly to hold on to deposits.

Bank of Greece data on the course of interest rates in October showed the average rate of deferred accounts was 4.50 percent, while the benchmark rate of the European Central Bank stands at 1.25 percent and the three-month Euribor is at 1.4 percent. In the last couple of years, BoG suggested, the cost of money has more than doubled, from 2.10 percent in 2009.

Greece?s average rate is the second highest in the eurozone after Portugal?s (4.57 percent) and ahead of Cyprus (4.15 percent). However, while Portuguese account holders are showing confidence in their banking system, Greeks are continuing to withdraw deposits that now add up to less than 180 billion euros, against 244 billion in December 2009.

Loan rates have also soared, as they have climbed from 4.70 percent at the end of 2009 to 6.85 percent in October for loans of up to 1 million euros.