Cyprus and Money

It was a week of high-stakes drama for the euro zone. Last weekend saw Cyprus leaders and European officials agree to a “bail in” whereby bank depositors would be “taxed” to help pay for the cost of bailing out Cyprus’ troubled banking sector. Apparently, outflows from Cypriot banks had recently accelerated and the available supply of emergency ECB liquidity had about been exhausted. The EU would contribute 10bn euros to the bailout, with Cypriot depositors on the hook for 5.8bn euros. The levy (“haircuts”) on deposits below the 100,000 threshold unleashed a firestorm of condemnation heard around the globe.