Cypriot 'solution' threatens further economic carnage among the other PIGS – Telegraph Blogs
An interesting piece from Jeremy Warner. The ad hoc fire brigade approach to the Euro crisis has made it clear that some are more equal than others in the new Euro Federation of Brotherly Love and Peace. From a banking viewpoint the perception that deposits in periphery banks are less safe than those in "core" countries has been solidified by the recent Cypriot bailout. What the above piece points out is that the ECB will have to replace funding that may well flee from the periphery to the core.
The incoherent effort by the Eurozone to fight the fire may inadvertently cost the most dogmatic more than they bargained for.The flight of capital from the periphery already seen because of fears of a eurozone break up will be further enhanced. No wonder the European Central Bank is so worried, for it is the the ECB which gets called on for funding when eurozone banks are facing deposit flight. Indeed, the absurdity of the German position on Cyprus, which is that creditor countries should not be expected to support periphery country banking systems, is that the ECB will have to support them instead, or as Machel Alexandrovich of Jefferies International puts it: "In saving €5.8bn in bail-out money, the other euro area countries will likely be on the hook for 4 to 5 times more in contingent Central Bank liabilities"