There are now four possible outcomes: either Cyprus surrenders and passes a modified cash grab (possible, but may involve seizing private pensions and could turn ugly); or the Eurozone blinks and hands over cash anyway (quite likely); or Cyprus gets bailed out by Russia, jeopardising the island’s relationship with Brussels (possible); or it becomes the first country to quit the euro (not yet the most likely outcome, but increasingly possible). The Cyprus affair won’t destroy the Eurozone – but it will show the world just how rotten the whole superstructure really is.
There is also talk of capital controls – the ultimate sign of political failure.
The contingency measures, described by three European officials, may not need to be implemented if the deposit outflow looks containable.
The measures include imposing limits on daily withdrawals from bank accounts; capping the amount of money that can be electronically taken out of the country and making these transactions slower to clear; and introducing border checks to cap the amount of cash leaving the country.
I keep hearing that Cyprus is too small to cause a run on the Euro – maybe. Yet I can’t work out why anyone would hold a Euro denominated bank account after last weekend.