The European economic crisis is far from over. The European Central Bank is calling for greater levels of depositor insurance to help cut back on bank runs. Without it, the ECB claims, the financial mayhem will spread virally.

Significant worries

Worries about whether Spain’s banking system will fail and whether Greece will survive in the euro area at all have deflated the value of euro currency to a two-year low against the United States dollar. Searching for a comparatively safe investment, European speculators have funneled their money into Austrian and French bonds, whose 10-year yields are at their low mark since the introduction of the euro.

The Associated Press explained that Spanish banks moved a lot of money in March faster than it has ever been seen since record keeping started in 1990. The fourth-largest bank, Bankia, lost a lot because of a real estate crash, which brought on it to be nationalized. Spanish banks have lost $82 billion in recent months in capital.

Plan for bailout not confirmed

International Monetary Fund Managing Director Christine Lagarde denied reports that the IMF is getting ready for a Spanish bank bailout to keep Europe’s economy from sinking further to the mire.

„There is no such plan. We have not received any request to that effect and we are not doing any work in relation to any financial support,“ said Lagarde.

At the same time, there is a June 17 Greek general election that will determine the nation’s future when it comes to the euro zone. The SYRIZA leftists are not winning right now; the New Democracy party is winning, and that party is for bank bailouts. Ireland voters want the European Union to help out a bit, according to the New York Times, which is why it wants the government to approve a referendum.

Trying to find clarity

European Central Bank President Mario Draghi has made it clear that European leaders must decide where their nations stand in relation to the euro quickly, and that the ECB will not write economic policy for the entire euro zone.

„We will avoid bank runs from solvent banks. Depositors‘ money will be protected if we build this European guaranteed deposit fund. This will assure that depositors will be protected,“ said Draghi.

Germany is well-known as a paymaster of the European Union and does not like the idea of a joint deposit guarantee for depositors that the ECB is pushing for. It is something German Chancellor Merkel is not sure about. Germany has not been willing to put taxpayer dollars to the union in the past.

„There are integration steps which will require treaty changes. We are not at that stage today but nevertheless there are no taboos,“ she said at a news conference.

Caution cannot be used

Draghi testified before European Union lawmakers that the European economic crisis has set financiers across the euro zone on edge, but that warning is not what’s required at this time.

„I urge all governments to keep this in mind, because it is better to err by too much in the very beginning rather than by too little,“ he said, citing the recent failures of Spain’s Bankia and the French-Belgian bank Dexia.

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