This morning we learned that after hours of tense negotiation, Europe has hammered out a 10bn euro "bailout" of Cyprus. I put the term bailout in quotes because the key feature of this deal is the bail-in of Cypriot depositors to the tune of 5.8bn euros. This means that depositors went to sleep on Friday night and woke up Saturday to find that their money, deposited safely in Cypriot banks had been seized and used to "bail out" the country. I see this as an extreme measure which, if the European banking crisis continues, will have very negative implications for bank depositor confidence in other European periphery countries.
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The Cyprus Bank Deposit Bail-in originally appeared on Credit Writedowns