The European economic crisis is far from over. The European Central Bank is calling for greater amounts of depositor insurance to help reduce bank runs. Without it, the ECB says, the financial mayhem will spread virally.

Worrying about the banks

The euro currency has deflated to a two-year low against the United States dollar due to concerns that Greece may not survive and Spain’s banking system could failure. Austrian and French bonds have 10-year yields at their low since the introduction of the euro, but European speculators are putting cash in nonetheless.

Spanish banks moved huge amounts of money abroad in March at a rate faster than has been recorded since record-keeping of such transactions started in 1990, notes the AP. The country’s fourth-largest lender, Bankia, reportedly was nationalized in May due to enormous losses following a real estate crash. As much as $82 billion in net capital has been lost by Spanish banks in recent months.

Not giving the help requested

Christine Lagarde is the International Monetary Fund Managing Director. She explained that there are no plans for a Spanish bank bailout. The rumor started because it might help shield Europe’s economy a little bit.

“There is no such plan. We have not received any request to that effect and we are not doing any work in relation to any financial support,” said Lagarde.

In the meantime, voters in Ireland are calling for their nation’s government to approve a referendum that will pave the way for additional European Union aid, notes the New York Times. The June 17 Greek general election will go a long way toward determining the nation’s future in the euro zone. Reports indicate that Greece’s New Democracy party – which favors bank bailouts – is currently in the lead over SYRIZA leftists.

A demand for clarity

European Central Bank President Mario Draghi has made it clear that European leaders must decide where their nations stand in relation to the euro quickly, and that the ECB will not write economic policy for the entire euro zone.

“We will avoid bank runs from solvent banks. Depositors’ money will be protected if we build this European guaranteed deposit fund. This will assure that depositors will be protected,” said Draghi.

While the ECB is pushing for a joint deposit guarantee for depositors, Germany isn’t sold. As the paymaster of the European Union, Germany has been unwilling to risk more of its own taxpayers’ cash to prop up the union. German Chancellor Merkel said Europe should consider all options.

“There are integration steps which will require treaty changes. We are not at that stage today but nevertheless there are no taboos,” she said at a news conference.

A ton of concern will not help

It is not a good idea to stay cautious at this time, according to Draghi, although financiers are really worried because of the European financial crisis.

“I urge all governments to keep this in mind, because it is better to err by too much in the very beginning rather than by too little,” he said, citing the recent failures of Spain’s Bankia and the French-Belgian bank Dexia.

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