Thursday, June 20, 2013

The Cypriot failout

Back in March, the EU started a bank-run in Cyprus, then imposed a bailout which basically ended Cyprus' role as an international banking hub. At the time I though that this would be a failure, and the collapse of the Cypriot banking sector would mean another bailout in a few year's time. I was wrong: it has happened even sooner:

Cyprus President Nicos Anastasiades has urged eurozone leaders to revise the terms of his country's bank bailout, in a highly critical letter.

He said the "haircut" imposed on large deposits under the 10bn-euro (£8.6bn) bailout had significantly eroded the capital kept by businesses in banks.

Losses were imposed on big deposits in Bank of Cyprus (BoC) and Laiki Bank. BoC is now in trouble, the letter said.

So, a bailout aimed at preventing contagion instead caused it, while causing untold misery in the process. That gurgling sound you can hear is the EU's legitimacy going even further down the drain.