For the past few months depositors have been emptying their Greek and Spanish bank accounts and moving the funds to safer places like Germany and Switzerland. This is not surprising. What is surprising is that anyone still has accounts in Greek and Spanish banks.
This is a trend with a limited lifespan. Either sentiment stabilizes and capital starts flowing back into peripheral eurozone countries (possible but unlikely), or the slow-motion bank run continues until the Greek and Spanish banks are empty, or the trickle becomes a torrent as everyone heads for the exits at once, thus crashing those countries’ banking systems.
In the second and third scenarios, the result will be capital controls ranging from bank closures (like FDR’s 1933 bank holiday), to expropriation of bank accounts (as when Argentina converted dollar-based accounts to pesos in 2002), to restrictions on the movement of wealth across borders. Planning for such capital controls is well under way: (more)