Chart of the week: Eurozone bank deposits recover slightly

Summary: Drain on bank deposits in periphery easing

What the chart shows: The chart shows deposits held by ‘other general government/other EA residents’ relative to the situation in January 2012 and January 2013

Why is the chart important: Bank deposits are the key component of broad money. The crises in the periphery countries was accompanied by substantial drains of deposits as households and companies moved money out of (distrusted) local banks, either to hold as cash or – more likely – to deposit in (trusted) banks in core euro area countries. But this also meant a drastic fall in broad money, in turn crippling banks further. As the euro area situation has stabilised and conditions have improved, however, marginally, this process has begun to reverse. In Greece, Spain and Ireland, bank deposits are now increasing. This does not mean that there is a strong and durable recovery on. But it does show improved confidence and gives some hope that the bottom may have been reached.