The European Union’s astonishing fumbling over Cypriot banks has both immediate and longer-term implications. On March 21, when the banks are due to reopen, the question is whether a run will destroy the Cypriot banking system. If that can be avoided, the next question will be what’s left of the EU’s plans to reform its system of bank supervision -- and what happens the next time an EU bank gets into trouble.
The danger of a run is real. This past weekend, the government of Cyprus and its financial backers, the EU and the International Monetary Fund, settled on a bailout formula for troubled Cypriot banks that included a 6.75 percent levy on insured deposits. The ensuing outcry prompted a revision to the deal that will curb or eliminate this provision before the banks reopen. But the message has already been sent: In the EU, insured deposits aren’t safe.
Quelle: Bloomberg
