Greek Banks Lost $898 Million in Deposits on Monday

A blog about business and economics.
May 15 2012 5:39 PM

Greek Banks Lost $898 Million in Deposits on Monday

One key reason not to leave the eurozone is that it will destroy your domestic banking system. But if depositors start to think your country may leave the eurozone then they'll start withdrawing money from your banks en masse and your domestic banking system will be destroyed anyway. So if your domestic banks are doomed, it's actually better to get ahead of the curve so you can leave and start imposing capital controls ASAP.

This, incidentally, is why any "firewall" strategy is going to be hard to implement. If you're Portugese and Greece leaves the euro, isn't your next move going to be to close out your local bank account to either hold cash euros or shift the funds into a German bank?

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.