Cyprus Problem | South’s Banks Experiencing Withdrawal Surge

Cyprus Problem | South’s Banks Experiencing Withdrawal Surge

According to the Daily Telegraph, the unlikely chance of loses as a result of the bailout have led to depositors taking cash out of the south’s banks.

“Cypriot sources say lenders haemorrhaged €1bn in deposits over the first two weeks of February, heightening fears that mere talk of “haircuts” is deepening the banking crisis as rescue talks drag on between the EU-IMF Troika and the island’s new leaders. The Bank of Cyprus reported deposit losses of €1.7bn in January.”

The reason that depositors are making these withdrawals is that they are suspicious that the bailout may not be the full €17bn needed, but may only be €6bn with the rest of the shortfall being made up by bank depositors losing a portion of their investments, despite the new Finance Minister being quoted as saying, according to Reuters, “there really couldn’t be a more stupid idea.” Unfortunately, other of the Minister’s statement have also proved unfounded, like the assertion that their would be no outside auditors checking for evidence of money laundering in south Cyprus banks.

The south seems to be tottering on the brink at the moment:

“The crisis is now deepening on every front. The jobless rate hit 22pc in February. The country will run out of money to pay bills in May. An internal report by Brussels says the bank rescue costs may push island’s public debt to 145pc of GDP.”

Cypriots withdrawing their money from banks seems just to be a reflection of the local panic at the south’s economic crisis rather than an analysis of the bailout reality where it is doubtful that the EMU leaders would impose investor loses and repeat the mistakes made in Greece.

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