Big trouble from little Cyprus - FT.com - 0 views
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The banks stand on the edge of collapse. But it is the European Central Bank that has pulled the plug by threatening not to accept Cypriot government debt as collateral against liquidity support.
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A restructuring of public debt is still likely. As Hamlet advises: If it be not now, yet it will come.
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Is there no alternative to the bail-ins? Yes: direct bank recapitalisation by the eurozone, for which the sum required is a small matter. If the banking union had been up and running, that would have happened. It is not, presumably because core countries do not want to bail out mismanaged banking systems,
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The first concern is the deal itself. The decision to impose losses on insured deposits is indeed a big error. (Yes, it is a default, not a tax.)
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The eurozone must either make the industry far more robust, by hugely increasing equity capital, or consolidate fiscal capacity and tighten regulation, to ensure adequate eurozone-wide oversight and fiscal support.
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Banking is dangerous everywhere. But it still threatens the eurozone’s survival. This has to change – and very soon.