The large increases in Target2 imbalances at the heart of the euro zone's banking system are widely considered not just a risk to national governments in the event of a eurozone breakup, but also a sign of capital flight. We have seen the definitive proof that bank deposits are leaving Greek banks,winding up in German institutions. In my view, this is the real risk for the eurozone. But the risk could also be for the euro zone as a whole and the question is how to identify evidence that a run on the euro has begun.
For full coverage of why the bank run issue exists, see my weekly post from June 29 on the EuroTARP. Now, the issue is capital flight from the euro altogether.
Here is the case Marshall Auerback put to me when we were discussing the Spanish bank situation. He said t...
As this site is now reader-supported via Patreon, the remainder of this article is only available to subscribers at a specific patronage level. Articles at patronage levels BRONZE, SILVER, and GOLD are denoted by the categories in blue capital letters above the post. Posts categorized DAILY are available to both SILVER and GOLD patrons.
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.