Comment: When a jog turns into a sprint, it’s time to worry

This is where Roosevelt and Churchill planned the Normandy invasion. Today, Obama, Merkel, Hollande, Cameron and Co. are fighting a different war – the War of the Euro.

They may be too late. This week the initiative passed from politicians to the ordinary person with a bank deposit. Scared depositors in Greece and Spain have been withdrawing cash from their accounts, raising the spectre of a Northern Rock on European scale.

When Greek banks opened on Monday, the day after inconclusive elections, savers withdrew some €700 million (£560m). In Spain, customers at the newly nationalised Bankia removed more than €1 billion over the past seven days. There has also been an upturn in withdrawals in Belgium, Italy and even France.

Truthfully, this hardly amounts to a Northern Rock yet. There are no queues forming at ATMs, even in Athens. Call it a jog rather than a run. But that has not stopped the equity markets taking fright, or the ratings agencies from downgrading Spanish bank creditworthiness yet again.

Are the markets worrying unnecessarily? No: it is all too easy for slow-motion withdrawals to turn into a flood if the herd instinct gets a grip courtesy of the internet. All it takes is for some politician to put a foot in their mouth at the G8.

To be optimistic, there is nothing particularly new in what happened this week. Savvy Greeks have been withdrawing euros and sending them abroad for safe keeping for some time. Greek banks have lost nearly a third of their deposits since the crisis began in 2009. UK banks have benefited from this exodus.

According to Evangelos Venizelos, a former Greek finance minister, a third of the money leaving Greece ended up in Britain.

But the constant draining of Greek bank liquidity raises the spectre of insolvency.

Fortunately for banks in Greece, Spain and the other indebted eurozone members, the European Central Bank (ECB) has recently pumped in a trillion euros of cheap liquidity to offset the deposit drain. This was triggered when Italian depositors started a major withdrawal of deposits last November.

Greek banks are also receiving huge emergency loans from the country’s own central bank. This money is being “printed”. Strictly speaking, this is against eurozone rules unless backed by collateral. But the ECB is turning a blind eye and not probing too deeply into the highly dubious assets the Bank of Greece claims it has set against these loans.

This leaves the ECB – not G8 politicians – as the front line of defence against a banking collapse. So it is significant that on Wednesday the ECB announced it was cutting off support to four rocky Greek banks, which will now have to rely on help from the Bank of Greece.

One theory is the ECB is warning banks in Spain that they need to re-capitalise urgently. The biggest danger from a Greek euro exit would be contagion spreading to Spain. Alternatively, the ECB may be signalling to Greek voters to get their act together for the 17 June elections.

If so, that appears to be working. A poll on Friday gave the pro-bailout parties a majority. If that prospect fails to materialise, the bank jog may turn into a sprint.

Expect a Facebook acquisitions splurge

ON WHAT is Mark Zuckerberg going to spend the billions in cash Facebook gets from its IPO? Facebook is not the only internet company with money to burn. Microsoft has accumulated nearly £38bn in cash and short-term investments. Apple has £70bn, and Google £33bn. Expect an acquisitions spree, not to mention bidding wars.

Buying other companies might seem a good way for Facebook to bolster its revenues before shareholders begin to doubt the absurd £66bn value put on the trendy social networking firm. In the frame are online advertising companies, music providers, and content-sharing innovators. Last month, Facebook bought Instagram, a photo sharing start-up with 13 staff, for £640m. However, it is all too easy to lose shareholders’ shirts buying high-tech start-ups at absurd prices, and the terms of the Facebook IPO leave geeky Zuckerberg in total control.