A collapse of the Greek banking system could be the first domino that sets off a chain reaction leading to an economic collapse. A run on the Greek banks could result if it becomes obvious that they are close to default based on the erosion of their deposit base as money continues to flow to safer havens.
There are three keys as to whether this data becomes a market moving event:
- The report must actually be released on the scheduled date (12/30/11)
- The report has to show a significant decline in bank deposits
- The markets have to decide that the change in deposit levels is a meaningful event.
The 1% decline in Greek bank deposits in November turned out to be a non-event. However, the fact that deposits are down 26 percent from the peak in December 2009 and at their lowest level since February 2007 is not a sign of a healthy banking system.
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