The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

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. Contagion from Cyprus to Italy and Spain has been avoided, partly because Cyprus is a small player in the eurozone, partly because the taxpayer (both local and eurozone) has taken less of the burden of any bailout with the bail-in of Cypriot bank depositors. And it’s partly because Mario Draghi and the European Central Bank have continued to talk about being ready to support the sovereign debt of distressed eurozone states.

But bailing in depositors has raised the risk of deposit flight every time there is a whisper of a crisis anywhere in the eurozone. And the introduction of capital controls threatens the principle of the single currency, the longer they last. Furthermore, the package is probably way too small to cover the funding needs of Cyprus over the next three years.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree