“In the meantime, a more immediate issue confronting investors is whether we are likely to soon witness a significant run on Italian-based banks. If the answer is yes, then this without question will be the end of the road for the eurozone and will confront the ECB and Germany with an inescapable choice of either providing unlimited support for all eurozone commitments (including deposits) or allowing the disintegration of the euro.
The good news is that as of Sep 2011 (the latest numbers available from the ECB and Bank of Italy), there was no evidence of a “run” on Italian banks. The overall deposits within the system were only down around 1% YoY to €2,154bn and indeed remained relatively stable throughout turbulence of the past 12 months. Does it mean that so long as the ECB partially stabilizes sovereign yields, all is clear? The answer is an unequivocal no for three reasons:….”
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