Greece: The Run on Banks has Begun

Greeks line up outside a bank for their pension checks March 26, 2010 in Athens, Greece

Finally, it seems the long-predicted Greek meltdown seems to have begun, with a run on the banks reported this week.  In addition, the credit rating on Greece’s government debt was downgraded deeper into junk bond territory by the Fitch credit ratings agency.

Fitch cited the risk that Greece, operating now with a caretaker government, could be forced to leave the eurozone after new elections next month.

An exit from the eurozone would be “probable” if the elections fail to produce a government that honors earlier austerity agreements with eurozone leaders, Fitch said.

Meanwhile, in what is close to panic, a run on Greek banks has begun.   Greece’s president says that close to $900 million worth of euros was withdrawn from Greek bank accounts on Monday.

Greeks are transferring withdrawn Euros abroad or hiding them at home – literally under mattresses or in closets.  As confidence in Greece’s continuation in the Eurozone falls, millions of Greeks have decided to take no chances.

An overnight switch to a New Drachma would render the savings of millions of Greeks worthless.

I know a lot of people have drawn their money from the bank,” said Apostolis Manafas 57, unemployed, of Athens. “I have friends that even hide their money in their closets. It reminds me of our grandparents and old Greek movies, where people sewed their savings in their mattresses.

The reality now is that the new election scheduled for June 17 may actually come too late given the pace of current events.  Greece’s fate may already have been decided by then.

There’s enough blame to go around,obviously.  Greece, for lying to the EU about their finances in the first place and refusing to reform their economy; the EU, for accepting continued Greek lies over the years; and successive Greek governments, for doing nothing to change the status quo.

Expect new developments to happen at breakneck speed in the coming days.