The capital controls in Cyprus and the Icelandic experience
Danielsson, Jon. Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment. […]
Banking Union with a Sovereign Virus: The self-serving regulatory treatment of sovereign debt in the euro area
Gros, Daniel. In many eurozone countries, domestic banks often hold more than 20% of domestic public debt, which is an unsatisfactory situation given that banks are highly leveraged and that sovereign debt is inherently subject to default risk within the euro area. This paper by Daniel Gros finds, however, that the relative concentration of public […]
Where has all the (base) money gone?
Papadia, Francesco, Giuseppe Daluiso. The short answer is: into the liquidity trap[1]. The longer answer starts from two quotations from Milton Friedman, which give the essence (but not the subtleties) of monetary policy as it stood before the Neo-Wicksellian school concluded that prices, in the guise of interest rate, not quantities, as monetary aggregates, are […]
Ο από μηχανής θεός είναι σε διακοπές διαρκείας
Παπαγιαννίδης, Αντώνης. Η δραματικότητα των στιγμών -ακροβασίες χωρίς δίχτυ ασφαλείας, όντως- για την Κύπρο, δεν επιτρέπει να δούμε σε αρκετό βάθος το πόσους εσωτερικούς διχασμούς έχει φέρει αυτή η ιστορία στην «Ευρώπη». Δεν το επιτρέπει, γιατί; Διότι την έχουμε την τάση -και οι Ελλαδίτες και οι Κύπριοι- αποδείχθηκε αυτό με τη συνεχή προσδοκία επικουρίας από […]
Σάκης Μανούζας: Οι αναδιανεμητικές επιδράσεις, η λογική και τα μειονεκτήματα της απόφασης για την Κύπρο
Η απόφαση του Eurogroup σχετικά με την επιβολή φόρου στις τραπεζικές καταθέσεις σε κυπριακό έδαφος, συνεπάγεται μία σειρά από αναδιανεμητικές επιδράσεις, οι οποίες διατηρούν το ενδιαφέρον τους, παρά το ότι το επίμαχο σχέδιο διάσωσης καταψηφίστηκε από την κυπριακή βουλή. Και διατηρούν το ενδιαφέρον τους, αφενός γιατί συμβάλλουν στο δημόσιο διάλογο αναφορικά με τη διαχείριση τραπεζικών […]
Europe’s Lost-and-Found Decade
Eichengreen, Barry. entiment in European financial markets has turned. For the moment, the possibility of a Greek exit from the eurozone is off the table. If interest-rate spreads on Spanish and Italian government bonds are any guide, bondholders are no longer betting on a eurozone breakup. European stocks even rose in the week following last month’s […]
Cyprus deal: the right intentions but major flaws
Darvas, Zsolt. On Saturday morning, after a marathon meeting of the Eurogoup, it was decided to impose a one-time wealth tax on deposits in Cypriot banks: 6.75% on deposits below €100,000 and 9.9% on deposits above this threshold. Involving depositors was a wise decision and a wealth tax is a mild form of bailing-in, as […]
Cyprus: The next blunder
Wyplosz, Charles. The Cyprus bailout package contains a tax on bank deposits. This column argues that the tax is a deeply dangerous policy that creates a new situation, more perilous than ever. It is a radical change that potentially undermines a perfectly reasonable deposit guarantee and the euro itself. Historians will one day explore the […]
To bail-in, or not to bail-in: that is the question (now for Cyprus)
Darvas, Zsolt. There is an intense debate on the possibility of bailing-in bank shareholders and lenders of troubled financial institutions (ie forcing investors to take losses), or relying on taxpayers to take the hit. For example, in a recent debate Charles Goodhart from LSE argued against, while Matt King from Citi in favour of bailing-in. […]
Φιλίππα Χατζησταύρου: The new-fashioned Europe
Be reassured. Despite the crisis which has been tormenting the EU since 2008, European integration shows progress, so we say. Indeed, but can we talk about integration in its classic sense? Certainly not. The crisis is in the course of changing the very nature of the European Union. Integration moves forward in an aggressive way, […]