The Greeks hold a large amount of cash outside the banking system even today, although the conditions in the economy are much improved compared to previous years.
From the Bank of Greece’s financial statements it appears that in November 2018 the value of banknotes in circulation, ie cash outside the banking system, was EUR 31,977 billion. Indeed, this figure was slightly higher than at the end of 2017 when it stood at EUR 31.1 billion.
The Bank of Greece figures on monetary circulation, ie the value of the cumulative net disposal of euro banknotes and coins by the Bank of Greece to commercial banks with a time of introduction in 2002, clearly shows the imprint of the economic crisis that erupted at the end of 2009.
The course in the years of the crisis
Since 2002, until the end of 2009, monetary circulation in Greece, as a percentage of GDP had been rising at about the same rates as in the eurozone. However, since 2010 started the large outflow of capital from the banking system due to the growing concern about Grexit. By mid-2012, off-system cash was over 20% of GDP.
Beyond that, monetary circulation reached its historic record, approaching 28% of GDP in the summer of 2015.
Since then, capital controls and the gradual restoration of confidence in the economy and the banking system have pushed down monetary circulation, but remain well above the eurozone average (16% of GDP, against 10%).
As the Bank of Greece comments, in its Interim Report, the monetary circulation/GDP ratio “was slightly upward in the first years after the country’s entry into the eurozone. After that, it skyrocketed during the episodes of the Greek crisis. Following the imposition of restrictions on cash withdrawals and the transfer of funds abroad from the domestic banking system, the ratio of monetary circulation to GDP is declining”./IBNA