Europe’s Perpetual Crisis
The Cyprus bailout deal is a watershed in the unfolding eurozone crisis, but imposing losses on banks’ depositors violates the deposit-insurance guarantee that forms part of the proposed European banking union, while the imposition of capital controls further erodes the monetary union’s foundations. So, is Europe chasing its tail?
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ATHENS – The Cyprus bailout deal is a watershed in the unfolding eurozone crisis, because responsibility for resolving banks’ problems has been shifted from taxpayers to private investors and depositors. But imposing major losses on Cypriot banks’ depositors violates the deposit-insurance guarantee that forms part of the proposed European banking union, while the imposition of capital controls further erodes the monetary union’s foundations. So, is Europe chasing its tail?