Greek Bank Run

Greek Bank Run.

Given the news of failed negotiations between the European Central Bank, the International Monetary Fund (IMF), EU finance ministers and the Greek government, there is in motion already a run on Greek banks across the country with reports suggesting that the Greek people have already withdrawn over €3 billion in the last week.

This is a staggering amount of money with the Greek central bank already going against the government's position, as an independent body, suggesting that the Greek government should compromise and implement further austerity measures to ensure that a further bailout can be arranged in order to meet the €1.6 billion loan repayment that the Greeks are required to pay by the end of June.

Around the world, the euro has fallen against most currencies and today £1 will buy you in excess of €1.4. The Dutch Minister who chairs the Eurogroup meetings has suggested that Greece needs to offer a credible and serious solution, which they appear to be not offering given that the Greek government was recently elected with a mandate to stop the severe austerity (i.e. spending cuts) measures that are in place and indeed required by her creditors.

The cash withdrawals of €3 billion represent nearly 3% of all cash deposits in Greece and clearly people are running scared and cash hoarding. This is no surprise.

We have already suggested a video this week that a compromise must be reached to avoid the complete collapse of all infrastructure in Greece, even down to no power supplies or fuel or food being delivered to Greece as they are bankrupt.

That said, even if a compromise deal is reached by the end of the month, we suggest this is a 'band-aid plaster placed over an open heart surgery wound' and ultimately there will be a Greek exit from the euro and a default on its debts. When watching reports, the Greek Prime Minister appears relaxed and we suggest they have already made plans to leave the euro to the extent that they no doubt have ‘state of emergency’ plans in place and have probably even printed billions of drachma.

We know that today the Greek Prime Minister is in Russia negotiating on a gas supply deal and again, this leads us to believe that there will be a full-scale Grexit.

It is going to be a rocky road for markets over the coming month. We genuinely are not sure which way the markets will go but whilst markets have fallen and stabilised today, a Greek exit would definitely cause a Euro stock market fall would then drag the UK down too. As such a slump in European equities and the UK's FTSE would likely follow suit.