As spectacles go, there are few more universal and inspiring than the run of the Olympic Torch in the lead-up to the summer games.
On Friday, as the torch headed from Olympia, Greece, to Britain, it was hard not to see irony in the fact that the torch wasn’t the only thing making a swift exit from the Greek isles this past week.
By some counts, more than 2 billion euros were withdrawn from Greek banks in recent days as the deposit flight that began two years ago accelerated at an alarming rate.
This event sets the stage for another summer of economic discontent. That’s because the run on the Greek banks shows that Europeans don’t have to wait for elections to voice their concerns — they can just vote at their ATMs.
They can vote that way not just in Greece, but also in Portugal, Italy and Spain, where news that 1 billion euros were withdrawn from financial giant Bankia sent that stock reeling. There’s good reason the Greeks and Spaniards are hitting the withdrawal button: Remarkably, there is no Euro-wide deposit-insurance system to prevent capital flight from weak countries into stronger ones.
Little wonder that Wall Street last week suffered its worst week of the year, and rates on 10-year US bonds fell to their lowest levels on record.
So where do US investors stand after a rotten week? It is now up to European Central Bank President Mario Draghi and German leader Angela Merkel to come up with a European-style FDIC plan.
Fed Chief Ben Bernanke and then-Treasury Secretary Hank Paulson showed that this can be done quickly and effectively when they moved to raise the insurance on US money-market accounts to $250,000 in the dark days of September 2008.
That crisis came a month after the Beijing Olympics, when all but a few of the billion-plus viewers sensed the economic firestorm coming.
Organizers of the London Olympics won’t get that pass. If Draghi and Merkel don’t act boldly in the next few days, the 2012 games will have a hard time competing with the bank run that could engulf the Eurozone this summer.