Cyprus

It occurs to me that the sovereign debt levels in Cyprus are unsustainable. As I have said previously, I believe this will lead to a government bond default. And given that capital controls already exist, the move to eurozone exit is much…

Paul De Grauwe, a professor at the London School of Economics, told Tom Keene on "Bloomberg Surveillance" today that the euro area is at risk because "so many big mistakes have been made." De Grauwe went on to say that the "ineptitude of…

This post is extracted from my newsletter sent out four weeks ago, at a time when the mood in Europe was much better than now and when there was even a sense that the crisis was in the process of being resolved. I mention this to remind…

The European Commission issued the following press release after the Cypriot Parliament rejected a proposed bank levy to recapitalize its banking sector.

A lot has been made about the fact that Russian money was in Cyprus and that Cyprus was an offshore tax haven. A lot of people are claiming all of this money is mafia-related or in Cyprus to dodge taxes. And it is this claim, especially in…

Regarding Cyprus, recently I heard someone claim that depositors are not creditors of a bank despite the fact that deposits are bank liabilities. This is bollocks. Depositors are indeed creditors, particularly in Europe where they are…

As I indicated three months ago, the IMF now supports capital controls in specific and extraordinary circumstances, particularly in view of its experience in Iceland. This is now relevant given the situation in Cyprus. Matina Stevins of Dow…

Today Cyprus voted to reject the deposit tax with 36 MPs voting against and 19 abstaining. One MP was absent. No one voted for the deposit tax. And so this trial balloon of bailing in insured depositors has crashed and burned spectacularly.…

The Cypriot banking system is insolvent. Heaping private losses onto taxpayers is bad public policy. Let's start with those two statements, because starting there makes clear that forcing losses onto bank creditors was the only choice in…

It has been non-stop Cyprus for the past couple of days this weekend. And it has brought back the bad ol' days when every weekend seemed to be another episode in endless crisis. To wit, this episode in Cyprus demonstrates how misplaced the…