This Crazy Cyprus Deal Could Screw Up A Lot More Than Cyprus…

Bank run

You can be forgiven for thinking that you don’t need to give a hoot about what’s going on in Cyprus this weekend.

After all, it’s just a little island somewhere in the Mediterranean.

But what’s going on in Cyprus could actually matter — not just to the rest of Europe, but to the rest of the world.

Here’s the short version of what’s happening:

Cyprus’s banks, like many banks in Europe, are bankrupt.

Cyprus went to the Eurozone to get a bailout, the same way Ireland, Greece, and other European countries have.

The Eurozone powers-that-be gave Cyprus a bailout — but with a startling condition that has never before been imposed on any major banking system since the start of the global financial crisis in 2008.

And … here’s the important part …

Other depositors at weak banks all over Europe, in places like Spain, Italy, and Greece, will rightly wonder whether this is the beginning of a new era of bank bailouts, an era in which bank depositors are going lose some of their money.

What do you think those other depositors in Spain, Italy, Greece, etc., are going to feel like doing when they realize that, if their banks ever need a bailout, they might have their deposits seized?

That’s right.

They’re going to feel like yanking their money out of their banks.

More…

      
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