One of the unintended consequences of the ongoing and accelerating crisis in the eurozone is that ordinary citizens are taking their money out of the banks and burying it. Lack of both confidence in the stability of the European economy and credible solutions to the crisis have led to the exit of currency from banks in Greece, Italy, and other European countries.
One Greek banker said that safe deposit boxes are in great demand: “There has been a big increase in rentals … about fivefold compared with last year. About 10 percent of the withdrawals we see are headed there. The most extreme case was a client who told me he was building a safe under his pool.” Retail bank deposits in that country are now at five-year lows, adding to the instability of banks whose balance sheets depend on those deposits staying put.
Italian citizens are moving their money out of the country into Switzerland while others are purchasing German bonds. Those purchasers have been so willing to pay for the privilege of owning safe German bonds that they have driven interest rates to less than zero.
Others are putting their paper into hard assets such as apartments in Berlin. Frederico Racca, a realtor in Berlin, reported, “Sales skyrocketed in the last two months due to fears of a possible default of Italy.”
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