Greece’s banks are dying, and fast

06-Aug (WashingtonPost) — Greece is finding out that you can’t have an economy without banks, but you can’t have banks without an economy, either. Or at least one where businesses aren’t allowed to buy the things they need to stay in business.

Now, Greece’s banks have fallen victim to a classic blunder. The most famous of which is “never start a land war in Asia,” but only slightly less well-known is this: “never set up shop in a country that’s been forced into mega-austerity and capital controls as a result of the currency union it’s a part of.” In other words, they didn’t lend money to people they shouldn’t have or lose money on their own bad bets. Greece’s banks just made the mistake of being banks in Greece.

…It’s only a slight exaggeration to say that this has made Greece go from having not much of an economy to having not one at all. Greek companies haven’t been able to pay foreign suppliers since they can’t send money out of the country, so their factories have run out of supplies. Everything has come to a standstill. Greece’s Purchasing Mangers Index, which measures manufacturing activity, just collapsed from a sickly 46.9 to a deathly 30.2. Anything less than 50 means that the manufacturing sector is shrinking.

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