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A bank run in the periphery will be the likely outcome. So that leads to money flowing to Germany, Switzerland and out from existing banks in the periphery. In addition to profit motives, this weakens the governments in the periphery as bank restructuring is one of those things they can not afford while staying in the eurozone. And leaving the eurozone means quick and painful rebalancing of the current account plus that the previous austerity was for nothing. All of which the governments in the periphery is trying to avoid. So essentially we have a re-start of the eurocrisis.

Now, lets look at the actors. If (and that is a big if) Schäuble is to be believed it was the Cypriotic governemtn, the EC and the ECB that wanted this. The Cypriotic government has not much of a negotiating position, so I think they can be ignored here. Leaves the EC and the ECB, two legs of the Troika. Restarting the crisis and putting more countries under Troika managment will mean that the Troika - and in particular the ECB - will gain in power.

So both class warfare per TBG and an ongoing coup to gather the real power under the ECB fits.

If one wants to put a narrative on it, it is the ECB doubling down after being scared by the Italian election result. They can't attack Italy directly at the moment so they weaken the periphery collectively hoping for bank runs in Italy to scare the politicians there into forming a pro-austerity caolition. But that is just guessing.

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by A swedish kind of death on Mon Mar 18th, 2013 at 04:11:16 AM EST
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