"Run on the Bank" -- yes or no? How of Spain governor’s sudden U-turn Bank came about

In 48 hours, the governor of the Bank of Spain, Luis María Linde, has gone from speaking openly--even though it was after journalists pressed on-- of the possibility of a "corralito" (a run on the banks following an account freeze) in Catalonia in the event of a unilateral declaration of independence, to considering the scenario as "almost impossible". Not only this, but the head of the issuing authority avoided using the taboo words, which evoke the queues at cash machines in Greece and Cyprus. He also reworded the possibility of a cap on the withdrawal of deposits as a "disaster" that concerns neither him nor Europe. So, what happened in those two days to make Linde swallow his own words, which were so well received by the PP, in an appearance before the Senate in which he was visibly uncomfortable?

After Monday’s statement, the governor came under fire not only from clearly pro-independence sectors, but also from members of the governing board of the Bank of Spain, who complained that they had not discussed the matter in their meetings, and the organization had been saddled with "personal" opinions. Some experts also warned that the mere fact that the "head" of Spanish banks insinuated the possibility of a "bank run" was imprudent because it could provoke panic among savers, which could step up the withdrawal of money from banks, thereby increasing the possibility of a "bank run", in a self-fulfilling prophecy. In fact, as was published on Wednesday in ARA, six prestigious Catalan economists have demanded Linde’s resignation, as they consider his words "extremely imprudent" and they "jeopardize the entire Spanish banking system". Official sources of the Bank of Spain refused to comment to ARA on these criticisms.

Furthermore, it turns out that Linde’s position coincided perfectly with what Xavier García Albiol, PP candidate in the 27-S elections, has stated publicly on a number of occasions. During the campaign, Albiol has been brandishing a report from the CATN (Advisory Council for the National Transition) to warn of the risk of a "bank run" in the event of independence. The truth, however, is that this report doesn’t say exactly this; it merely warns that the Spanish state, with its stubborn resistance to recognizing the new state and a declaration of war on an economic level, could end up forcing this "disaster", in the words of Linde.

Linde’s words on Monday were well received by the Spanish government and the PP. "It’s what there is", said Pablo Casado, party spokesman. But this alignment with the PP’s position (added to the destabilizing effect that his words could have) did no favor to the image of independence that the organization must maintain; it is formally separate from the government executive branch, although its president is chosen based on the recommendation of the Spanish government.

The criticisms of Linde did not come only from outside the organization, but also from within. In addition to economists and experts, other members who are very close to Linde privately expressed their discomfort with the governor’s words, who usually avoids these types of political debates, which lie outside of his area of responsibility. In fact, on Monday Linde was not expecting to speak about Catalonia, and it was only after journalists insisted that he made his controversial statement, according to sources in the Bank of Spain.

Treasury doesn’t back down

All of this undoubtedly influenced the decision by the governor of the Bank of Spain to back down, although only halfway, and play down the possibility of a "bank run". But the nuance that Linde delivered before the Senate did not put an end to the economic debate connected to independence. While the head of the bank overseer backed down, the Treasury Minister added fuel to the fire, with an official statement --written in a very direct and unusual tone for this type of communication-- in which he formally questioned Artur Mas, the Catalan president, who had referred to the possibility that Catalonia would not take on Spanish debt in case of independence.

"Catalonia has the credit rating of junk bonds. If it announces that it will not pay the debt, who will provide financing? At what price?", the Ministry asked. The department led by Cristóbal Montoro, who has had a very discreet role in the 27-S campaign, predicted that Catalonia would be "financially non-viable and politically unstable" in the event of independence, and it assured that it has been only thanks to funds pumped from Spain that Catalonia has not gone bankrupt.

Scaremongering is not stopping, even though many of its most ardent proponents have been froced to back down, or don’t know how to go beyond campaign slogans, as happened to Mariano Rajoy on Tuesday.