Against the tide: Cyprus – They think it’s all over

The Cyprus solution is inadequate as well as sending the wrong messages on depositors’ risks and free capital flows. Then there’s Slovenia... and Italy.

Last month I argued that optimism in financial markets must be balanced against the risk of pessimism on growth from a fiscal squeeze in the US and the return of the euro debt crisis. The jury is still out on the first risk but the second risk has come back with a vengeance. The debacle of the bailout deal negotiations over Cyprus revealed yet again that the continued recession in Europe is putting the single-currency area under pressure.

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