Comments from the Eurogroup’s Dijsselbloem on Reuters:
- Eurozone countries with large banking sectors must look to restructure and reduce overall size
- If uninsured depositors need to be ‘bailed in’, they will be
- Aim is to shift risks away from the public sector
- If bail-in process works, direct ESM recapitalization may never have to happen.
The first thing this means is that you should never, ever keep more than 100K in a savings account. Second, this means all European banks are now likely to have fewer deposits, there will be less money for lending and growth will suffer.
The euro has fallen through 1.2900 as this kills any notion that Cyprus is a ‘unique case’ and that a deposit levy is a ‘one-time event’. Dijsselbloem is saying what happened in Cyprus is now the blueprint for dealing with a debt crisis.