Could France Leave the Euro? Some Depositors Think So

Far-fetched as the idea of France leaving the euro may seem, the movement of money across the country's border suggests some people are preparing for that outcome.

As of February, the debts of the Bank of France to other central banks in the euro area stood at about 96.3 billion euros, up from 7.4 billion euros in July 2011 -- a change of 88.9 billion euros. Such liabilities arise when people shift their deposits out of French banks into the banks of other euro-area countries such as Germany and the Netherlands. The movements, which can broadly be described as capital flight, indicate Europeans are increasingly concerned that the currency union might break apart.

Last week, Bloomberg View published an editorial looking at the rise in capital flight throughout the euro area. We left France out of an accompanying chart, because the central bank had not yet reported data for February. Now they have, so we're publishing here an updated chart including France as well as Finland.

Interestingly, France was a destination for capital flight until July of last year, when renewed financial troubles in Greece and Portugal fueled worries that larger euro-area countries could suffer a similar fate. In the eyes of European depositors and investors, France has become a weak link.

(Mark Whitehouse is a member of the Bloomberg View editorial board.)

Attachment: Capital flight in the euro area

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Capital flight in euro area (cumulative since Feb. 2010)

National central banks; Numbers for all countries are estimates of the change in Target2 claims or liabilities. Data for Italy and Ireland include balances related to the issuance of euro banknotes.

*Number for June 2010 may be understated, due to a lack of precise information on France's Target2 claims for that month. **Monthly data are estimated using adjustments derived from annual reports.

Source: National central banks; Numbers for all countries are estimates of the change in Target2 claims or liabilities. Data for Italy and Ireland include balances related to the issuance of euro banknotes. *Number for June 2010 may be understated, due to a lack of precise information on France's Target2 claims for that month. **Monthly data are estimated using adjustments derived from annual reports.