Government’s job is to shield UK taxpayers from Euro chaos

WHEN a country’s president warns that its banks are in danger, and reveals that depositors are pulling out cash from their accounts at a record rate, it is time to dig out the tin hats and the cans of baked beans. Yet that was exactly what happened in Greece yesterday on another pivotal day for the Eurozone. The beleaguered Greek president, who was forced to announce another election after the failure of talks between the political parties, claimed that €800m had been taken out of the country’s banks by 4pm on Monday. Even if that figure is exaggerated – some claim that the withdrawals had happened over a longer period – it is clear that the slow-burn Greek bank run is beginning to accelerate dangerously: over the past couple of years, net withdrawals have amounted to around €2.5bn per month but the figure this month will be much higher. But what is truly puzzling is why so much money remains in Greek bank accounts: €165.36bn at last count, which given the risks to the solvency of Greece and its financial system, and the growing threat that all domestic bank accounts will be converted into an ultra-weak new drachma if the country is forced out of the euro, makes little sense.

Greece may still be bailed out again, regardless of how vigorously it thumbs its nose at its paymasters, including Germany. But if that happens, it would rob the Eurozone of influence over all other troubled economies. There would no longer be any credibility to bailout deals; other supplicants such as Portugal would expect to be able to continue spending like a drunken sailor while having the tab picked up by others. The moral hazard would soon become unbearable for Germany, which is why it will prefer to allow Greece to go to the wall and quit the euro, hoping to ringfence other countries as much as possible. A bust Greece would also need European Central Bank liquidity to prop up its banks; again, the ECB would discredit itself were it to be seen to be bailing out insolvent, rather than illiquid, institutions. It won’t happen; Greece will quit the euro. It’s time to start preparing for the Grexit. The government’s sole mission now should be to protect UK taxpayers from European or IMF claims to their pockets. A Greek exit and default will indirectly hit the UK economy – taxpayers shouldn’t also have to contribute to mop up the fallout from a destructive project they rightly never sought to take part in.

FACEBOOK BUBBLE

EVERYBODY uses them but making money from social networks remains tough. Twitter, which now claims it has 10m active users in the UK, has found it notoriously hard. But even mighty Facebook, which is about to launch its $100bn float, could soon be having some trouble on this front.

General Motors last night confirmed that it is cancelling its $10m Facebook advertising spend because it doesn’t feel it worked. The news came as WordStream, a search marketing firm, released a study comparing the effectiveness of Facebook ads with those on Google’s display network – those ads it places on millions of websites, not those that it displays alongside its own search results. The findings aren’t good for Facebook: the click through rate of an ad on the Google display network is 0.4 per cent, against 0.05 per cent for Facebook. People aren’t in the mood to consume advertising when on Facebook. It is clearly a valuable company, and a cultural phenomenon. But a mooted market cap of at least $100bn? Bubblenomics is back with a vengeance.