Real fear is not about Greek savers

by James Mackintosh

Financial Times
May 16, 2012

The slow motion bank run in Greece has accelerated, but at 0.75 per cent of deposits a day remains far from Britain’s Northern Rock, which lost 5 per cent of deposits in a day.

Investors worry that those withdrawing cash are right: if Greece leaves the euro they will avoid drachmageddon. But investors’ real fear is not about Greek savers; it is that a Greek exit will start bank runs across the eurozone periphery, putting the global economy at risk.

It is too late to protect against a “Grexit” cheaply. Eurozone bank shares are already at euro-era lows, and Greek shares were last at this level in February 1990.

Some markets have moved more than others, though. Money markets are afloat on a sea of liquidity from the European Central Bank, and seem almost immune to fear.

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