Greeks willing to pay to keep money safe

Greeks are resorting to negative interest rates, taking their money out of local lenders and placing it in foreign bank accounts – in effect choosing to pay a premium for the protection of their capital.

The foreign mutual fund market has quadrupled in just a few months, as from 1.4 billion euros at the end of 2014, it now exceeds 6 billion euros. This is money that moved from Greek banks under the pressure of uncertainty and is now in foreign bank accounts and with money market funds investing in short-term securities abroad.

With the Euribor interest rate in negative territory for some months now, depositors are paying foreign banks to keep their money safe. Greeks are seeking refuge for their capital in banks based in France, Germany, Belgium and in some cases European periphery countries, with the interest rate hovering around zero.

Similarly, depositors are breaking their time deposits with an interest rate of 1.5-2 percent, releasing funds that would have remained locked in for a period usually averaging at three months. The liquidation of time deposits comes with a penalty for the remainder of the period that amounts to 2 percent of the remaining interest. That way, depositors are effectively forfeiting any capital gains from their money placement in their efforts to protect their funds from a Greek eurozone exit or the imposition of capital controls.