Over at The Nation, Dimitri Papadimitriou writes about the accelerating eurozone bank runs, in which euros have been flowing out of Spanish and Greek banks and into Germany at an eye-popping rate, and lays out scenarios for how this whole things ends:

The migration of money into Germany is quickening. And under TARGET 2, the trillions of euros that the ECB has loaned out to finance this race will be uncollectable.

How to counteract a disaster of these proportions? Unlimited deposit insurance for all euros in EMU banks, backed by the creation of a strong European federal treasury, would end the bank runs, just as deposit insurance in the United States has prevented them here ever since the Great Depression. The insurance liability would be on Europe’s central bank, which would become insolvent if Spain or Italy abandoned the euro. Since, unlike the United States, the ECB doesn’t have a unified European treasury to backstop it, Germany would presumably get the bill for a default.

As Randall Wray and I predict in a new Levy Institute policy paper, “That’s a bill Germany will not accept, hence, probably no deposit insurance.” And no future for the euro.

Update:

Papadimitriou was also interviewed on the topic for Ian Masters’ Background Briefing radio program (listen here).