01/11/2016 - Mish Shedlock on Bank Bailins In Europe
“What is causing bank depositors to flee their banks in the first place? The answer is fear of bail-ins, confiscations, capital controls, and bank failures like we have seen in Greece and Cyprus. Recent examples include Portugal and Italy. These bail-ins are causing jitters. Can you trust Spanish banks? Italian banks? French banks? Greek banks? .. Depositors increasingly say no. And the recipient banks in Germany, Netherlands etc, don’t want to risk bonds in those countries when the deposits are transferred .. Do you think German banks are safe? If so, you are badly mistaken .. If Spain, Italy, Greece, or any country leaves the eurozone, someone will have to eat those imbalances .. How would the ECB would allocate those losses? Government, depositors, or bondholders will be bailed-in directly. Alternatively, the ECB will violate the Maastricht treaty and print the money to cover the losses. In that case, the euro will take a hit. Nothing in Europe is safe!”
