According to a report released by one of the Hellenic Banks operating in Greece, Alpha Bank, bank financing towards the private sector of the Greek economy is continuing to decline.
According to data released, Bank financing has decreased by 4.6% on an annual basis, November 2012, and remains so at about the same levels all of 2012.
As far as businesses is concerned, bank financing declined on an annual basis by 5.6%, October 2012. The Net flow of financing towards the private sector of the Greek economy was negative by 722 million Euros, as of November 2012, and just over 1 billion Euros less in October 2012.
It is clear that a negative financing towards medium and large businesses has a negative impact in its statement of cash flows, since changes in balance sheet accounts and income (which now days is rare since demand has virtually vanished) affect cash and cash equivalents.
Cash flow statements are used as a tool to determine if a business will survive. Since the financial crisis in Greece and its entrance into the sphere of influence of the IMF, led by its incompetent politicians, many businesses in Greece cannot pay their bills, like electricity and taxes.
Financing towards businesses decreased by 5.4% on an annual basis in November 2012.The financial flow towards them was negative by 343 million Euros during the same period, and 605 million in October 2012.
Sector wise, negative bank financing are experiencing sectors in agriculture, commerce, construction (it is down more that 40% since construction has stopped), transportation and communication, trade, shipping and industrial.
On the other hand, sectors that have seen increased bank financing are in electricity and natural gas, water, and a slight increase in Tourism.
Bank loans - Financing towards consumers continued to remain negative throughout 2012, and in November 2012 they showed an annual decline of 3.9%. The net (negative) monthly flow of financing for consumption loans was 125 million, while for mortgage loans, negative by 224 million.
The continued decline in financing toward consumers has to do with the fact that in all aspects of the Greek economy there is a drastic decline in demand. The same explanation is given by the bank with figures like a decline in house supplies by 17%(this past year), or the decrease in car sales by 40% in the same 9- month period of 2012. Not to mention home sales if one looks around Athens, one finds many new built homes that were built 3-4 years ago and are unsold.
As bank executives explain, as well as government officials, one of the main reasons that financing has drained in the last 2-3 years is the fact that deposits were exiting the Hellenic Banking system due to the so called “Greexit”, and the fact that the Greek debt reduction. This has cost the banks holding Greek bonds in their portfolios due to the “hair cut”, and now that Greece has received the necessary financing, part of the money will go towards the recapitalization of the balance sheets of the Banks. This, in conjunction of the fact that deposits are continuing to enter the Greek banking system, will provide the necessary financing so that banks can supply the economy with liquidity.
One last thing we should point out here is that since the crisis all commodities and assets have decreased, or lost their value. Among them are homes owned by millions of owners. Since banks accepted the debt haircut on Greek government bonds, why are they refusing to accept the fact that home values have lost more that half their values, and foreclose(confiscate) homes of consumers that received mortgage loans, and now are unable to pay due to their wage decreases(in the private sector), or they have lost their jobs? Those in the public have also seen their wages cut, but they still have a steady salary…
