In its latest issue Fortune magazine has stated that a run on European banks in 2011 could happen and that Ireland could lead the way.
Correspondent Colin Barr Barr wrote in an article entitled “ 2011: Year of the Bank Run?” that there was a major chance that a run could happen and it would start with Ireland.
“Irish bank deposits declined in November for the fourth straight month, the central bank said last week,” he pointed out.
“Overseas deposits fled the country at their fastest pace in more than a year.”
Barr wrote that the politicians in Ireland may have caused a greater problem by guaranteeing all the bank debts.
“Worse yet, it shows that the solutions policymakers slapped together in the fall of 2008 helped in some cases to create even bigger problems -- ones that are now coming due.
“Unconditionally guaranteeing bank deposits is just such a policy, in a country where loan losses made the banks insolvent, job loss left many taxpayers peniless and deposits now at least double annual economic output.
Fortune quotes Scott Minerd, chief investment officer at Guggenheim Partners, who thinks the entire banking system of Europe could be on the brink of disaster.
"Facing facts like these, each morning when I wake up I have to wonder, 'Why is today not a good day for a wholesale run on the Irish banking system?' And if there is a wholesale run on the Irish banking system, then what stops the same scenario from cascading into Portugal, Greece, Italy, and most importantly, Spain?" he told Fortune Magazine.
"As sovereign credit downgrades continue to flow in and deposits in Europe's weakened banking system flow out, a broader crisis in Europe appears to be imminent in 2011," says Minerd.