Wednesday, 24 February 2010

Greece haemorrhaging cash

You have heard of a run on the bank? Well, a run on a whole country has started: the Greeks are sending their money abroad as fast as possible. Favoured destinations are Cyprus, Switzerland and Luxembourg, and the reason is simple: they expect currency controls to be imposed in conjunction with heavy taxation and they want their cash out before that happens.

About €8bn-€10bn is thought to have packed its bags and left. When you consider that banks typically lend 30x their deposits this means €300bn of available capital has drained from the system. The Greek GDP is only €340bn!

A lot of Greece's problems stem from the fact that taxation is largely optional, but now they are tightening the rules it looks like there will be no money left to tax.

Observer
Zero Hedge

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