The Cyprus fiasco has the hallmark of a classic whodunit. Someone somewhere took a decision that now no one no-where appears to have made – to impose an unprecedented levy on bank deposit holders in Cyprus. Most commentary on the deal has been terribly negative, sometimes alarmist – it will spark off bank runs in Spain or that it rips the shirts of the backs of the poor in Cyprus. There were some exceptions to this negative coverage including yours truly.
A school of thought agreed with the need for a depositor bail-in but was uncomfortable with not exempting depositors under the Euro 100,000 deposit insurance cap – though technically such a limit is irrelevant for the clever levy that has been proposed. We at Re-Define belong to this school and did not criticize the concept of bailing-in depositors having agreed with the IMF that this was both fair and unavoidable in order to make the numbers add up in the rescue of Cyprus.