Cyprus No Longer in Eurozone

Sarris Muffles Calls for Cyprus’s Exit From Euro Area – Bloomberg.

Okay, maybe the title of this post is over the top.  Cyprus still uses the euro and has access to the ELA program sponsored by the ECB.

On the other hand, consider this scenario.  If you have €500 deposited in a Deutsche Bank branch in Munich and want to buy a new tv, you can make your way to the ATM, withdraw your euros and take a trip to the local mall to buy your tv with cash.

What if your €500 is deposited in any bank in Cyprus instead? The banks are closed and cash withdrawals are limited, so you do not have access to your euros and cannot buy that tv.  Under the circumstances, wouldn’t you rather have your euros in another country? Doesn’t this make euros in Cyprus worth less?

While cash is the same in either country, bank deposits are now denominated in two types of euros, standard and Cypriot, the only difference being that the latter is less liquid than the former.  Inexorably, the new, Cypriot euro will spread to other countries in the periphery as they run into trouble.

 

Advertisements

2 thoughts on “Cyprus No Longer in Eurozone

  1. It has all been neatly planned.

    EU would not give bailout of what was considered “Russian tax avoidance money,

    Russian safe haven, Russian illegal money”.

    Or at least the German people would not stand for it, without risk to Merkel.
    No way shall you bail out the Russian Oligarchs.

    So what do you do about that ?

    Freeze Cyprus banks, BUT

    allow Russians to remove this money via Cyprus bank branches located in Russia.

    Now the EU citizens/German people, cannot be angry about a bailout used to protect

    Russian money. The Russian money is gone, they will be asking for bailout

    to protect local Cyprus citizens.

    Now Merkel is saved.

    Nicely played.

  2. Expect the announced flabbergasted surprise soon

    Cyprus reports tricky Russians removed all the funds

    so only us poor Cypriats are left

    we need EU bailout.

    What a shock and shame this has happened.

    We are all caught by surprise.

    Those tricky Russians.

    Shame on them.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s