Sunday 20 August 2017

Greece crisis: Greeks pulling money out of banks...and spending it on cars

Confiscated luxury cars are seen inside a warehouse of ODDY in Athens...Confiscated luxury cars are seen inside a warehouse of ODDY, the Public Property Management Organisation, in Athens September 5, 2012. Known by its Greek acronym ODDY, the Organisation for Public Property Management ran warehouses nationwide that auctioned off anything from old sofas discarded from city hall waiting rooms to luxury cars confiscated from drug dealers. Now, efforts to consign ODDY itself to the scrapheap, along with its loss-making payroll costs, show just how hard it is for the Greek government to satisfy foreign creditors' demands that it shut down dozens of state agencies to save money; it may say it is waging war on red tape, but the red tape may be winning. Picture taken September 5, 2012. REUTERS/John Kolesidis (GREECE - Tags: POLITICS BUSINESS SOCIETY EMPLOYMENT)
Confiscated luxury cars are seen inside a warehouse of ODDY in Athens...Confiscated luxury cars are seen inside a warehouse of ODDY, the Public Property Management Organisation, in Athens September 5, 2012. Known by its Greek acronym ODDY, the Organisation for Public Property Management ran warehouses nationwide that auctioned off anything from old sofas discarded from city hall waiting rooms to luxury cars confiscated from drug dealers. Now, efforts to consign ODDY itself to the scrapheap, along with its loss-making payroll costs, show just how hard it is for the Greek government to satisfy foreign creditors' demands that it shut down dozens of state agencies to save money; it may say it is waging war on red tape, but the red tape may be winning. Picture taken September 5, 2012. REUTERS/John Kolesidis (GREECE - Tags: POLITICS BUSINESS SOCIETY EMPLOYMENT)
Cars queue at a petrol station after concerns over shortages led to panic buying in Athens

Mehreen Khan

Here is a slightly surprising sign that Greece is in the classic throes of a bank run: car sales jumped by 47pc in April. It was the 20th consecutive month that car registrations of new and used vehicles has risen.

People living in a country gripped by financial turmoil often worry about the security of their money. If it's in a bank, it can be caught up in capital controls or lost through insolvency. Better, then, to spend it. And the purchase of choice is often a car.

This makes motor vehicle sales figures a decent proxy for financial turmoil (under some circumstances).

Ordinary Greeks, many of whom are not wealthy enough to hold bank accounts outside of the country, are taking their money of the financial system and spending it on "hard" assets.

In December, when snap elections were called in Greece, monthly car registrations soared by nearly 70pc. Since then, bank desposits have shrunk by nearly 15pc of their total value. Another €7bn left the country in April alone.

A similar phenomenon was observed during Russia's financial meltdown late last year. The rouble's crash resulted in many Russians scrambling to make "high-ticket" purchases - like cars.

During Cyprus's banking crisis in 2013, car registrations increased by nearly a third in 10 months. Many Cypriots rightly feared their unsecured deposits would be at risk from the "bail-ins" of the country's biggest banks.

Cypriot consumers also chose to make their purchases in cash, rather than be tied to financing or hire-purchase deals.

Despite depreciating in value quite quickly, cars are still a handy asset to own because they can be put to productive use - especially if the alternative is just stashing your money under a mattress.

In a strange irony of Greece's woes, German industry is perversely one of the main beneficiaries of the country's banking collapse. Greek consumers, like many of their fellow Europeans, buy German cars more than any other brand.

Telegraph.co.uk

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