Greece: Bank Deposits Down Euro70 Bln Since 2009

ELENA BECATOROS

ATHENS, Greece (AP) â¿¿ Bank deposits in Greece have fallen by euro70 billion ($92.5 billion) since the start of the crisis in 2009, the finance minister said Monday, an indication of the massive loss of confidence in the economy as it repeatedly came close to bankruptcy.

Evangelos Venizelos said only euro16 billion of the funds withdrawn from Greek banks was sent abroad, mostly to the U.K. The rest is largely spent as families and businesses eat into their savings, or hoarded by households preparing for the worst case scenario â¿¿ a debt default or Greece's exit from the euro.

"This money, if it existed in the banks, would allow for loans to be made to businesses, for the economy to move, for unemployment to be tackled," Venizelos said in an interview on Antenna Television.

He stressed the importance of restoring confidence in order to encourage the return of funds to the banks, insisting that a new bailout deal and a major bond swap designed to slash Greece's overall debt will strengthen the financial sector.

Greece will this week learn what percentage of its private creditors will participate in the bond swap, known as the Private Sector Involvement, or PSI, an integral part of Greece's second bailout without which the country could default.

The banking group leading negotiations on behalf of the creditors said Monday that 12 of the largest investors have committed to participating in the plan.

The Institute of International Finance said the investors who pledged to participate include German insurer Allianz, French bank BNP Paribas, Germany's Commerzbank and Deutsche Bank, as well as Greece's Eurobank EFG and National Bank of Greece.

Private creditors have until Thursday night to decide whether or not they will participate, unless the deadline is extended. The success of the deal depends on high participation.

Failure of the deal would mean the country could default on its debts on March 20, when it faces a euro14.5 billion payment on a maturing bond, unless some other drastic solution is found. If the swap goes ahead, the country would not have to repay that amount on that date.

The uncertainty has hammered confidence in Greece's economy both abroad and domestically, leading to a steady drain on bank deposits.

"Many billions are kept in homes. They are as we say in mattresses or in boxes," Venizelos said of the missing deposits. "Of course, others have been spent on taxes, for families to live, for businesses to survive."

Two years of austerity which have included salary and pension cuts and repeated rounds of tax hikes in return for billions in international rescue loans have left Greece's economy mired in recession. With unemployment topping 20 percent and nearly half of young people out of a job, thousands of small businesses have shut down and many families are surviving on whatever savings they might have had.

But with the possibility Greece might default on its debts and ultimately have to leave the European Union's joint currency, the euro, many depositors have also withdrawn their money for safekeeping elsewhere, either abroad or stashed in homes.

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Gabriele Steinhauser contributed from Brussels.

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