Marshall Auerback - Another One Bites the Dust: The Euro Bank Run
June 4, 2012 It might seem strange to invoke Freddie Mercury and Queen in the context of the eurozone, but it’s the first thought that springs to mind, as Brussels and the increasingly hapless ECB, continue to mismanage their way to financial and economic catastrophe. Yesterday, there were sigs that the Spanish plan to recapitalise Bankia (which came with the implied backing of the ECB’s balance sheet) introduced a potential way out of the eurozone’s metastisizing banking crisis. Sadly, it’s another idea which will never get off the bulletin board, as the ECB bluntly rejected any proposal to use its balance sheet to indirectly fund Bankia, the troubled Spanish lender
So we’re back to floundering and the markets are reacting accordingly. What most investors, experts, and policy makers fail to realize is that this bank run is not simply a Greek problem, which will cease if and when Greece is thrown out of the euro zone. If one looks at the Target 2 balances, the ELA, and the ECB’s lender of last resort facilities, it’s clear that this has extended into all of the periphery countries, including Spain and Italy. It may well end with Germany’s banks effectively serving as the deposit base for all of Europe. See this chart, courtesy of Gavyn Davies.
Read More:
http://www.counterpunch.org/2012/06/01/another-one-bites-the-dust/
