Euromoney (May 31)
“There’s one problem with a European deposit guarantee scheme: it won’t work.” Fear of bank runs is growing. To counter these fears, Jose Manuel Durao Barroso, president of the European Commission, has put forth “a banking union with integrated financial supervision and single deposit guarantee scheme” (DGS). However, a DGS would do little to calm fears of redenomination, even if it could be prepared in time. Greece has a DGS, yet 25% of bank deposits were withdrawn in the past 2 years, largely because savers worry their euro deposits will be redenominated into drachma. Furthermore, most DGS “protect against the failure of one or two banks, not the failure of a national banking system.”
“There’s one problem with a European deposit guarantee scheme: it won’t work.” Fear of bank runs is growing. To counter these fears, Jose Manuel Durao Barroso, president of the European Commission, has put forth “a banking union with integrated financial supervision and single deposit guarantee scheme” (DGS). However, a DGS would do little to calm fears of redenomination, even if it could be prepared in time. Greece has a DGS, yet 25% of bank deposits were withdrawn in the past 2 years, largely because savers worry their euro deposits will be redenominated into drachma. Furthermore, most DGS “protect against the failure of one or two banks, not the failure of a national banking system.”
Athens News (February 11, 2012)
“Sacrificed at the altar of continued eurozone membership, Greece’s youth are paying the highest price for the politicians’ inability to implement virtually any of the reforms stipulated in the first bailout memorandum….Greece is better off in the euro than with the drachma, whatever the arguments to the contrary. But it will not be long before people in their twenties and early thirties say that enough is enough.”
Tags: Drachma, eurozone, Greece, Politicians, Youth
