The blog’s many friends in the petchem industry in S Europe have become more frequent visitors to London in recent months. Often, they are in the process of buying flats or houses. As one long-standing friend commented, “would you want to leave your money in Spain today?”
They are not alone. A detailed analysis by Bloomberg shows that “Europeans are increasingly losing faith that the currency union will hold together”. As their chart shows, capital flight is also now happening on an unprecedented scale within the Eurozone:
• People in Italy (red column), Spain (purple), Greece (blue), Ireland (green), Portugal (light grey) and Belgium (light blue) have moved €789bn out of their countries
• They have instead deposited it in Germany (dark blue), Netherlands (black) and Luxembourg (dark grey)
Bloomberg add that:
“As the capital flight figures demonstrate, the stricken nations of the euro area are bleeding private money and becoming increasingly dependent on taxpayers. In all, the debts of struggling banks and sovereigns to official creditors such as the EU, the ECB and national central banks now exceed 2 trillion euros, much of which would be lost if the debtor nations dropped out of the currency union.”
Markets became used during the 1982-2007 Supercycle to the idea that only economics mattered. Now, they are suddenly having to realise that politics may well matter more in the New Normal.