The Extraordinary Thing Is That There Hasn't Yet Been A Bank Run Across The Mediterranean

 

 There comes a point when bank runs are rational

By Daniel Hannan

 

It is irrational to start a bank run, Mervyn King once observed, but rational to join one. It remains to be seen whether the EU has irrationally started one with its expropriations in Cyprus; but there is no question that it is rational for anyone with a bank account in the Mediterranean eurozone states to join in.

Until now, the EU has sought to reassure depositors by guaranteeing – absolutely guaranteeing – that savings up to €100,000 are secure, a pledge solemnly repeated by the Cyprus government. Any Cypriots who believed that assurance now know better. The EU got around its promise through a disgusting ruse. The banks are not technically bust, and so the deposit insurance doesn't apply; and the seizure is theoretically a wealth tax rather than a loss.

What would you do now if you had savings in a Greek, Spanish or Portuguese bank? Or an Italian bank? Or even a French bank? It's not as though you're getting any interest anyway. And now it turns out that, despite all the promises, your savings are vulnerable to arbitrary confiscation.

In theory, the European Central Bank is ready to step in in the event of a panic by depositors. But its funds have already been heavily tapped. Italian banks now hold €281 billion in ECB loans, Spanish banks €278 billion. Huge as these numbers are, they are only a tiny proportion of the total banking sectors of those two countries: less than 8 per cent.

Cyprus is not a one-off, but a grisly forerunner. As I argue in the Daily Mail, Brussels has plainly decided that the only way out of the euro crisis is to come after savers. A bank run, as I say, is rational.

Indeed, the curious thing is that it hasn't yet happened. The rich have moved out of these countries, stashing funds in Switzerland and snapping up properties in London. But, even in Greece, the overall level of bank deposits has fallen by just 30 per cent since the crisis struck. Do the Greeks know something we don't?

Related Reading:

Fanatics Who Will Do Anything To Save The Euro

Daylight Bank Robbery In Cyprus Will Haunt The EMU

Cyprus Offers A Scary Economics Lesson For America

Willie Suttonomics

The Rape of Cyprus

Cyprus and the Death of Deposit Insurance

The Extraordinary Thing Is That There Hasn't Yet Been A Bank Run Across The Mediterranean

After Cyprus Bank Bailout, Depositors Race To Withdraw Their Cash.  Is The Rest Of Europe Next?

Monumental Deceit:  How Our Politicians Have Lied And Lied About The True Purpose Of the European Behemoth

The EU's Insidious War On The Nation State Must Be Halted

Václav Klaus Warns That The Destruction Of Europe's Democracy May Be In Its Final Phase

Bubble Times:  20 Facts About The Collapse Of Europe That Everyone Should Know

The UK to the EU:  Eeeeeew!  Go Away!

Europe's Double Dip Teaches A Lesson About Taxes

A Message To Leftists In The UK & US From Sweden

Suicide-By-Demographics, Post #3,209,598

Leavin' Here:  Escape From The E.U.S.S.R.

(European) Union Power!

Über Alles After All

There's No Such Thing As A "Permanent" Tax Cut

Immigration & The Town That Stopped Mincing Words

Hitler's Ghost Haunts Europe

A Lib Dem Gives Voice To Britain's National Sickness

The American People Voted For Big Government.  Now, Let Them Pay For It!