OPINION

Save savings

The National Bank of Greece’s announcement of the new savings interest rates was a rude awakening to a grim reality, with a 0 percent rate for up to 1,000 euros, 0.7 percent net interest rate for up to 10,000 euros, less than 1 percent net interest rate for deposits of up to 59,000 euros and 1.4 percent for deposits of up to 147,000 euros. Apart from this provocative divergence from loan rates (for example, 9.5 percent for consumer loans or 15.6 percent for credit cards) this annulment of deposit rates creates an unprecedented social problem. Unlike other countries, Greece is a country of depositors, not borrowers. Having saved sums of usually no more than 44,000-59,000 euros, many people used to supplement their monthly salaries or pensions with their bank interest to ensure a satisfactory or just bearable standard of living. The inability from now on to receive some revenue from interest rates comprises a serious loss of income for these people who will soon have to choose between a decline in their living standards or eating into their savings in order to maintain their present standard of living. The new bank policy creates overall insecurity for the present and the future. The stock market malaise means that these people will by no means invest their savings in the bourse. There is, at least, one short-term solution. The State continues to borrow at a 5.5 percent rate but, because of the growth of the primary bond market, ordinary citizens are no longer able to invest in the bonds or treasury bills that would yield a 5 percent rate instead of the 0 or 1 percent rate offered by banks. Individuals now only have indirect access to treasury bills or state bonds via special fixed-return bank products which yield a maximum 3.5 to 3.7 percent interest rate. The solution is an obvious one. A part of state bonds and treasury bills should be made available to the public so that their savings can continue to provide an interest rate-based income. The unconfessed economic malaise is, perhaps, urging the government to force savings into other activities. But one should wonder about the long-term consequences of this policy. The savings of medium- and lower-income groups have often absorbed the repercussions of financial crises and helped stave off social instability. The bourse has already done great harm to social harmony. Banks and savings accounts should not finish it off.