“Cyprus and the EU reached a new late-night bailout deal last night that will reduce the chance that Cyprus’s financial system and economy will completely implode.
The 10 billion euro deal requires Cyprus to drastically shrink its banking sector, which has grown to 8Xs the size of the country’s economy, by unwinding Cyprus’ second largest bank, Laiki. In doing so, bondholders and depositors with more than 100,000 euros will take a hair cut.”
Moreover capital controls have been instated to restrict the amount that depositors are able to withdraw from their bank accounts each day. All of this is likely to drive nervous depositors out of other Eurozone banks in the near term. See this direct video link for a discussion of the likely ramifications of the Cyprus bail-in.
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