You can’t bank on anything…
People are getting very, very worried about the consequences of the financial crisis that is rocking the United States and which this week began to shake Europe. With the news of one bank after another being rescued by government intervention in the United States and Europe, Greeks are wondering what is happening to their banks and their deposits. Prime Minister Costas Karamanlis has repeatedly said that the crisis will not affect the Greek banking sector. Two weeks ago, he visited the Bank of Greece to make such a statement and he repeated this after a Cabinet meeting on Tuesday. The central bank’s governor, Giorgos Provopoulos, has been saying the same thing: Greek banks have not been exposed to the «toxic waste» of bad loans in which other countries’ banks are sinking. But people are worried. They have learned from the past that no matter what governments might say or try to do, when an international crisis breaks out, no one escapes the consequences. Greece is no exception. With the structural problems that its economy faces, we are likely to be in for a very rough ride as the waves from the earthquake reach us. Already money has become more expensive. The rise in European interest rates has raised the cost of borrowing in Greece. This will affect mortgages but will also make life difficult for companies that need to service loans or borrow more funds in order to expand. It will shake our banking sector which, spoilt by the fact that it could keep showing huge increases in profits each year (with 60 percent increases being unexceptional), will have to pay high prices for interbank loans. This will squeeze profits. In the best of circumstances, borrowing will be tougher for individuals and companies; at worst, some banks may have to scramble to merge with others in order to protect themselves. People can feel the ground shaking. They worry about their loans getting more expensive and they worry about the safety of their deposits. These fears are compounded by the fact that the real estate market, the seemingly permanent haven for money in Greece, is both overinflated and shaky: It is very expensive and, at the same time, such investments look increasingly risky. After being told that no one had anything to fear from the American troubles, people hear of more and more Greeks who, through local banks, had invested in risky bonds and are now wondering what they will get in return. Following last year’s revelations of state pension funds’ outrageously risky investments in structured bonds, people wonder what new surprises may be in store for them in this most sensitive sphere. Those involved in commerce or tourism know that consumers in Greece will have less to spend and there will be fewer – or poorer – visitors from abroad. None of this will be good for Greece or for them. But the thing that probably worries people the most is that they have learned not to be assured by officials’ reassurances. They know that what will be will be, irrespective of what those in office have to say.
