The single market’s biggest test
IF SOMEONE had given Greek president Karolos Papoulias a textbook called How To Cause A Bank Run, they could hardly have improved on his action this week. In a publicly recorded meeting he told political leaders that Greeks are pulling cash out of banks in droves, and that this could spark a “panic”.
But it is not just Greece that is hemorrhaging cash. The ECB’s payments system, TARGET2, shows other peripherals states are too. Its data shows what different Eurozone central banks owe each other. Unsurprisingly, the Bundesbank is owed the most – more than €600bn, borrowed mostly by peripheral euro countries’ central banks. The figures reflect the degree to which Frankfurt has had to fill the funding gap (faced by both governments and banks) left by savers pulling their money out of these countries.
Typically, states in this situation react to capital flight with controls on what you can take out of the country. That is against EU law, but if it comes to a choice between the single market and no market, there’s little doubt as to what governments will choose.