It was obvious to me that the price of saving the huge banks of tiny Cyprus would be too high:
Everybody in Europe is on notice, now. Where do the bank runs start on Monday? Surely, some people are going to think that if Cyprus has gone this route, their country is the logical next country that will confiscate money. This is Willie Sutton territory (When asked why he robbed banks, he said "because that's where the money is." At least according to urban legend, anyway.).
And this was a plan by the smart guys and gals of the EU. In what world are they living? In their centrally planned world, an exception for tiny Cyprus is just that--an exception that proves the rule that your bank accounts are safe. In the real world, fear for what little you've accumulated as a reserve against bad times will motivate your actions.
Now it is obvious to more:
The Cypriot economy is tiny -- less than half a percent of the euro area’s gross domestic product. Even if worse comes to worst, the direct fallout for the rest of Europe will be minimal. Perhaps that accounts for this weekend’s absurdity. Nonetheless, the readiness to repudiate the principle of deposit insurance is knowledge that can’t be unlearned or confined to one “special case,” and it will make managing the next EU banking crisis more difficult.
I'll hold my breath when the banks reopen on Cyprus. The fear of losing your money even in "safe" banks where your money is insured against theft by Suttons or loss by poor bank managers--but not by Eurocrats--is now on the loose in Europe. Try getting that back in the box.
