Tuesday, February 12, 2013

Scylla and Charibdis

“As far as its banking sector is concerned, Cyprus is halfway between Ireland and Iceland,” says one Berlin official. Ireland’s banking sector was eight times the size of the national economy when it imploded, Iceland’s more than 10 times.

Calling it halfway between the two doesn't really capture the constraints that come from being in the Eurozone, as Cyprus is. Unless the Eurozone is considering a radical change in policy, Cyprus is Ireland. Incidentally, also in that article is the idea that Cyprus could be the first country in which depositors in rescued banks might not get all their money back. Ireland has already raised that prospect.