Eurogroup Head Warns Big Depositors Their Money Isn’t Safe

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Now that big depositors in Cyprus’s banks have been told they’re going to lose a huge chunk of their money, what’s next? Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of eurozone finance ministers, says this might be the right template for dealing with future bank failures:

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he said

….”If we want to have a healthy, sound financial sector, the only way is to say, ‘Look, there where you take on the risks, you must deal with them, and if you can’t deal with them, then you shouldn’t have taken them on,'” he said.

In one sense, Dijsselbloem is just saying the obvious: uninsured deposits are uninsured deposits. If a bank fails, you might lose some or all of the money you’ve deposited there.

In a way, this is a laudable reminder that you should be careful about where you put your money. On the other hand, telling everyone that, hey, what happened in Cyprus might happen again in Spain, or Portugal, or Greece, seems almost deliberately designed to create a huge bank run. At least, that’s how everyone took it. As a result, Dijsselbloem quickly released a very brief statement: “Macro-economic adjustment programmes are tailor-made to the situation of the country concerned and no models or templates are used.”

We’ll see if that helps. The problem is that Dijsselbloem pretty obviously meant what he said, and no one has rushed out to say otherwise. What’s more, as we all know, banking crises and sovereign debt crises are inextricably connected. Bank runs from big depositors would almost certainly lead to further sovereign debt crises, which obviously couldn’t be solved by going after big bank deposits. At its heart, then, this is just a reminder that Europe’s problems are far from over because it has so far refused to deal with its core issues of capital flows in a fixed exchange rate area. There’s no telling which trouble spot will erupt next—there are too many to choose from—but erupt it will. One of these days, Angela Merkel is going to have to level with her constituents about exactly what this means.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate