“Until [the weekend before last], “it was assumed that deposits were safe,” says Nicolas Veron of the Peterson Institute for International Economics. “This is a watershed event. We are entering a new world where deposits are no longer safe.”
This is the significance of what’s going on in Cyprus.
What Veron and others fear is that, in a future financial crisis, retail depositors — worried that some of their supposedly guaranteed accounts would be confiscated — will stage bank runs, making the crisis worse.
Note that Cyprus banks have been closed for 10 days now. ATM limits are down to 120 euro. Capital controls too – you can’t get your euros out of Cyprus (but you can transfer your euros from any other bank to any other bank in any other eurozone country – doesn’t this make the euro in Cyprus worth less than a euro elsewhere?)
The article is in Japanese newspaper …
Interesting times indeed.
