The Political Economist

After the latest Cyprus deal has gone through, it's time to compare it with all other Eurozone bailouts done in the previous two years: Source: The Economist Greece is still leading the pack with a combined stimulus effect of over 100% of its GDP, and 21,000 bailout funds per capita. With the latest Cyprus deal they fall behind second to Greece in the magnitude of the bailout with respect to a country's GDP. It would also be interesting to show Iceland in the graph (or Hungary ), as they had similar bailout-to-GDP ratios as Cyprus, except they received help from the IMF (and other Nordic and European countries), not the Eurozone. In absolute terms, the bailout of Cyprus is rather small compared to other Eurozone economies (due to the size of their $25bn, 1.1m people economy). However, this shouldn't be an excuse as to why Greece was bailed out more or less in full, with several years of painful negotiations and forcing bondholders to accept the losses, while...

This week the negotiations in Cyprus over its fragile banking system reached a new low. Cyprus was given a  € 10bn bailout (they desired  € 17bn initially) from the Eurozone to recapitalize its banking system, with the price they have to pay for this being dire. This radical bailout plan forces a 9.9% tax on deposits over  € 100,000, and 6.7% on deposits under  € 100,000. Unlike previous bailouts in Greece, Portugal or Spain where bond-holders took a big cut, this is the first time a bailout proposal will fund itself from peoples' savings. The signal this is sending is that small savers (not responsible for the crisis) should be punished while the bond-holders who willingly took risks should be protected. Needless to say such a bailout proposal is very likely to turn into a disaster for the domestic economy. Investors were spooked, the people went to the streets, mainly to  pull out their money from banks , while  markets dropped  at the sight of such...