by winston » Sun Mar 24, 2013 6:42 pm
So 1.1m people and EUR10b can take down the world's financial system ?
The island nation accounts for a fraction of euro zone economic output, and yet the wrangling over a 10 billion euro($13 billion) bailout package kept markets on edge throughout this past week.
The Cypriot ruling party said Friday that it was close to a deal to raise billions of euros in order to secure a bailout from the European Union to avoid a financial meltdown and a potential exit from the euro.
Euro zone leaders have offered the country 10 billion euros on the condition it raises 5.8 billion euros on its own. The rescue plan is smaller in scope than previous bailouts to euro zone members, making investors worry less about a banking collapse and more about the possibility Cyprus would exit the bloc and drop the euro currency.
The worry "is the psychological knock-on effect of the credible possibility of some (country) saying Cyprus got out, now they are on their own, they devalued their currency, they don't have to go through austerity'," said Art Hogan, managing director at Lazard Capital Markets in New York.
"What is going to stop Greece from doing the same thing? And you start a daisy chain."
Similarly, investors had reacted harshly to proposals by European officials to tax depositors - including those protected by depositor insurance - to fund the bailout. That sparked some selling on the idea that such a plan could set a precedent for dealing with other troubled euro zone economies, and set off bank runs across the continent.
Source: Reuters
It's all about "how much you made when you were right" & "how little you lost when you were wrong"