Liquidity noose tightening around local lenders’ necks

Given the upcoming treasury bill issues and the ongoing withdrawal of cash from deposit accounts, Greek banks find themselves between a rock and a hard place.

The Finance Ministry’s planning currently provides for T-bill issues totaling at least 7 billion euros in February and March, which bank officials believe will be very difficult for the local credit system to cover unless the European Central Bank changes its stance regarding the acceptance of T-bills as collateral. Without an ECB shift banks will likely suffer, as deposits have been shrinking at a growing rate: In October and November they bled a total of 500 million euros, in December they fell 3 billion and this month’s outflow is expected to reach 5 billion.

Bankers note it is exceptionally important for liquidity conditions to improve, which requires the formation of a strong government, political stability and quick and efficient negotiations with the country’s creditors to determine the course of relations with the eurozone and the International Monetary Fund. Talks will have to be rapid, as protracted negotiations will further undermine confidence in Greek economy.

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