Tag Archives: Cyprus

By William K. Black

Slate’s Matthew Yglesias writes columns about economics and finance.  Yglesias has been writing about Cyprus, and my critiques of the policies he has been proposing are the subject of this column.  The short version of the background one needs to understand the issues is that Cyprus is in a crisis and the EU is willing to bail out its collapsing banks only if Cyprus raises revenues.  The EU is unwilling to make the banks’ sophisticated creditors – the bondholders – take any losses.  The EU wanted the banks’ least sophisticated creditors – the depositors – to take losses, even if their deposits were small enough to be within the deposit insurance limit.  The reality, which the EU wishes to obscure by calling its proposal a tax, is that that the EU was insisting that depositors no longer be fully protected from loss by government deposit insurance.  The EU demand was made shortly after the EU and Cyprus’ government pledged that depositors under the insurance limit would suffer no losses.  Continue reading →