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The Botching of the Cyprus Bailout: Worse Than Lehman Brothers - Forbes

Although they had years to consider their options (Cyprus's problems are closely related to those of Greece and have long been almost as obvious), they have opted for a "solution" that amounts to probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.

As my colleague Tim Worstall has pointed out in a well argued contribution yesterday, they have weakened - perhaps catastrophically - the principal pillar sustaining modern banking. This pillar is deposit insurance. Ordinary savers who had received a solemn assurance that deposits up to 100,000 euros were safe are now being asked to take a haircut. This raises questions about deposit insurance throughout the EU and invites runs on banks not only in the most "financially-challenged" nations such as Greece and Spain but even in Italy and France.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Mar 17th, 2013 at 01:31:40 PM EST

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