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Originally Posted by panicos81
My view on Cyprus at the moment!!
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Great picture!
It's interesting, the problem with Cyprus is no larger than the losses that Chase had with one FX bet last year. To the Euro zone, it's a drop in the bucket and yet they, the EU, are risking the whole system by penalizing depositors as a solution for what is essentially caused by bad loans to Greece. In the US, we had a bailout of most large failed banks and systemically important financial institutions, including insurance companies and non-bank money market issuers, etc. The US bailout recognized the need for confidence in the monetary system. The bailout actually worked and most of the money has been paid back with positive returns. Even Fannie and Freddie have started paying back their debt.
Anyway, the EU seems to be thinking that just because Cyprus is small that they can treat it cavalierly. However, things don't work that way. Depositors may see the signal that it's not safe to put their cash in Greece, Spain, etc. and the downward spiral will be reinforced and even accelerated. Cyprus needs the same kind of support that Greece received.
Dave