Having examined the recent developments in the Eurozone, one of the main consequences of the euro crisis is the incline of outflow in private deposits as individuals perceive the economic climate quiet unattractive in certain areas. In addition countries suffering the immediate threat of a potential default face the concern of a withdrawal from the Euro as the case for Greece that could cause a collapse or turbulence in the banking sector with unpredicted results which at the worst scenario can even mean a breakdown in financial institutions that will hence be unable to preserve the deposits of the individuals.
Given the above macroeconomic picture in the Euro area, households that foresee negative financial prospects attempt to protect the lifetime savings by either gambling in currency, i.e. exchanging their euro saving accounts into some different currency that they perceive as more stable, such as dollars, english pound, australian or Canadian dollars, etc. This option guarantees the protection of the deposits in the scenario that the country to which the bank account is held decides to exit the euro and devaluate a newly launched currency. However, the threat of this choice is that the banking institution of the domestic country that finds itself under a default regime, might end up bankrupt as well. Since the deposits are held at home (where home defaults and the financial institution faces bankruptcy) the owner might risk to lose all the deposits regardless of the currency that the account is in. As a result, gambling in currency while keeping the deposits at home should be selected if the individual foresees that the default and the devaluation of the new currency after the country exits euro will not harm the banking sector or threaten financial institutions with a potential collapse.
Alternatively, the second scenario a forward-looking depositor might select, is to send the deposits to a financial institution abroad, to a country that is more protected from the current euro financial crisis. In such case, even after a country in the Eurozone defaults, the deposits will not be threatened as the banking sector of the recipient country will be more secure.
I have analysed the two mechanisms of "rational" (?) investing thinking so as to explain two interesting measures that are derived from the concepts. These are the deposit outflows by country and the currency preference by country. The first involves the individuals who select to expatriate their money to a foreign financial institution. For academics and journalists it is extremely useful to measure the countries that the individuals choose to send funds to. The second, is a figure of "currency strength" in the minds of the individual depositors. Both may constitute an exceptional index of economic climate expressed by the confidence of the private account holders.
Unfortunately, although I thoroughly examined the sites of both Eurostat and European Central Bank for data related to the status and movement (flows) of private account holders by country, I was unable to retrieve anything useful or relevant. The problem is that this information should exist and financial institutions, policymakers and a few journalists are aware of. Does anyone have an idea how or where relevant information may be retrieved? I would appreciate any recommendations as i ended up desperate after searching in most relevant data portals. I am mainly interested in deposit outflows and currency conversions for countries at the core of the crisis which belong to the periphery of the EU such as Greece, Italy, Portugal, Spain.
Funnily enough, in various newspapers the reader will be able to find numerous articles containing information about private deposit outflows such as number of outflows in money and frequency, recipient countries etc. The articles i have read, unfortunately, don't reveal the sources of the data while some mention that are derived from confidential banking sources and analysts.
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