Businesses and households ‘eat from the ready’ – Reduction of deposits

By Leonidas Stergiou

Household and corporate deposits continued to decline in February, confirming the forecasts of bank executives, when requested by the Capital.gr to comment on the vertical fall of January. As they had pointed out at the time, in addition to the traditional “deflation” that occurs every January, bank figures showed that the gradual fatigue and gnawing of deposits will occur in the coming months, due to price increases and tax liabilities.

Tax obligations

Indeed, the Bank of Greece data for February show that the net decrease in the savings flow corresponds exactly to the net increase in the deposits of the central government and the local government. February, in addition to the inflated energy bills that burdened the operating costs of businesses and households, had “double” tax liabilities.

Taxes

Due to the snowfall, there was an extension in January for payment of VAT until the beginning of February, while by the end of the same month current tax and insurance obligations (VAT, income tax, etc.) would have to be paid, as well as various costs transferred to Local authorities from the mass transfers of real estate until December 31, which were processed in January (due to a change in fair values). However, employment support schemes weighed on insurers’ deposits, dropping slightly in February (they paid € 129 million more than they received).

Accuracy and withdrawal of pandemic support measures

In addition to tax liabilities, businesses and households are faced with inflated energy bills and rising prices for raw materials and commodities. At the same time, most pandemic support measures are ending or have expired, such as moratoriums (25 billion loan installments suspended), Bridge 1 and Bridge 2 (5 billion euro household and business loan tranche subsidies) and step-by-step bank loan schemes (step up) and other measures that indirectly supported the incomes of businesses, employees and households.

Businesses

The net decrease in corporate deposits (inflows – outflows) amounted to 333 million euros in February, much smaller than in January by 2 billion (2.3 billion euros). However, lower insurance liabilities appeared in February, compared to January, while the current accounts were also fed by a net disbursement of new bank loans of 363 million euros.

Households

The analysis of household deposits is more complicated because the total amount includes private and non-profit institutions. The total net decrease in February was € 45 million, but if we do not take into account the private non-profit institutions, then the current accounts and household savings accounts increased by € 1 billion.

However, this increase of 1 billion in the current accounts of households in February is lower than that of January and December (3.4 billion euros), while it is particularly interesting how this net increase occurred:

First, by “breaking” time accounts and accounts with a warning of 780 million euros.

– Second, from net borrowing through consumer loans amounting to 17 million euros to cover emergencies.

Thirdly, a slowdown in the repayment of mortgages (less repayments than new disbursements, ie more loan liabilities) by EUR 174 million.

This analysis, combined with the need for € 17 million in consumer loans and tax liabilities, shows that there has in fact been no real increase in savings. Moreover, averages and totals do not represent every case, due to the large unequal distribution of deposits.

Tax Office, Funds and Local Authorities

The picture completes and completes the figures that are “missing” from households and businesses or partly explain a larger decrease in deposits, the movements of General Government accounts, where in February, in total, deposits decreased by 9 million euros due to payments from social security institutions amounting to EUR 129 million (mainly related to support packages).

On the other hand, tax deposits increased by 338 million euros (almost 100 million euros more than in January), while from payments to local authorities by 42 million euros.

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