Archive

Posts Tagged ‘bank runs’

Cyprus. Been There, Seen That

March 19, 2013 2 comments

A small country is on the verge of bankruptcy. It is so small that the amount of money needed to save it (17bn euros) amounts to less than 0.12 per cent of the eurozone GDP (no typos here. It is around 30 euros per European citizen).
Been there, seen that. Just three years ago in another small country, Greece. At the time, procrastination, self interest, ineptitude, unpreparedness, made the small problem become huge. And we are all still paying the bill. The Greek crisis management was so successful that our leaders are happily embarking in the same dynamics: improvised, dangerous, half-baked solutions, supposedly designed to avoid free riding (the protestant syndrome, once again) and in fact destabilizing the whole system.

There is no need for me to repeat what has been understood everywhere except, as usual, in Berlin, Frankfurt and Brussels: the tax on deposits breaks an implicit pact between governments and depositors, and fragilizes the banking systems of the whole periphery of the eurozone. Read More