Yesterday, May 15, 2012, CNBC reported that Greek depositors withdrew 700 million euros ($900 million) from the nation’s local banks recently.
That’s a straight quote from Greek President Karolos Papoulias, who was citing a conversation he had with Greek Central Bank Governor George Provopoulos. Papoulias admits, “the strength of banks is very weak right now.”
Turns out the $900 million figure is too low.
Tyler Durden of ZeroHedge reports that Papoulias announced this morning that almost $1.27 billion has been pulled from Greek banks in the last 10 days. Papoulias said he had been warned by the central bank and finance ministry that the country faced “the risk of a collapse of the banking system if withdrawals of deposits from banks continue due to the insecurity of the citizens generated by the political situation”.
Durden writes that if Greece defaults on its $1.3 trillion debt, “forget the drivel that you read in the press because it will not just be the sovereign debt but the municipal debt, the derivatives, the bank debt, the corporate debt and all of the obligations of the country that will fall into the sinkhole of no return.”
Attempts to form a government in Greece collapsed yesterday, jolting financial markets at the prospect that leftists opposed to the terms of an EU bailout could sweep to victory in a June election and nudge the euro zone crisis into a dangerous new phase.
Meanwhile, Spain is going down the toilet. This morning the Prime Minister of Spain said that “Spain faces the serious risk of being shut out of the markets.” ZeroHedge sees that comment as the precursor to Spain turning to the European Union and the IMF for help: “In Spain we are faced with bare bones arithmetic where the country cannot bailout its Regional debt and its back debt because they do not have the capital to do either; much less both.”
Take a look at this graph, showing the jobless rate in Spain to be worse than Greece’s (click graph to enlarge):
Greece’s $1.3 trillion debt may seem puny compared to the United States’ $16 trillion national debt, but Greece is a small country. A more meaningful statistic is its debt to GDP (Gross Domestic Product) ratio, which is 120%. That means Greece’s national debt of $1.3 trillion is 120% of its GDP.
Lest you think America is hunky dory, our nationa debt now exceeds our GDP, which economists consider a danger sign. The last time I saw a report, which was in February 2012, the ratio of our debt to GDP was 101%. As a point of comparison, although the ratio increased to 41% at the end of the 1980s, it decreased to a “mere” 31% by 2001, then increased to 62% by the end of fiscal year 2010.
In other words, in less than two years (we’re not yet at the end of fiscal year 2012), Obama and the useless Congress had expanded America’s debt to GDP ratio from 62% to 101%!