Deposit withdrawals in Greece have been substantial over the past two years. However, the failure of Greece's politicians to form a coalition government has resulted in deposit withdrawals accelerating - click here and here for more on this. Depositors are rightly concerned about the exit of Greece from the euro and the subsequent devaluation of their deposits. The puzzle for me and many others is why are there so many deposits still remaining in the Greek banking system. One reason is that the Greek banking system is being kept alive by massive injections of money from the ECB. Will the ECB continue to support the Greek banking system in the face of a mass withdrawal of deposits? I doubt that there is the political will in Germany for this as the Bundesbank already has a huge exposure to Greece (as well as Spain and Italy) through the ECB's internal Target 2 system.
