Together with the election of François Hollande in France, a European bank walk (more and more depositors moving money out of the banking systems of countries they think might be at risk of leaving the euro) is steering Europe toward a new set of policies. As the Financial Times details, Germany in particular is being forced to reconsider ideas they had previously declared non-starters:
The proposals, which could include empowering the eurozone’s €500bn rescue fund to directly recapitalise faltering European banks and commonly backed eurozone bonds, have been backed by some leaders in the past but forced off the agenda by the German chancellor’s objections.
Since the beginning of 2010, deposits in Greek banks have fallen by about a third, and the pace of withdrawal has accelerated sharply in recent days: on a single day last week Greek depositors withdrew €700 million. Meanwhile, deposits in Irish and Spanish banks have also been falling. In Spain, rumors of a bank run led to a fall of 30 percent in the value of Spanish bank shares. The banks recovered their value the next day, but the episode illustrated the alarming speed with which a modern bank panic can unfold.That’s the thing about bank runs: They can go viral. The more you hear about other people taking their money out of the bank, the more you think you ought to do the same thing. When this snowballs, you have a true panic. It’s the kind of disaster that can wipe out big banks overnight, throw weak governments over the edge, and generally wreak havoc on the European and even world economy. No wonder European policymakers are scrambling for yet another set of contingency plans.