Cypriot government official and parliamentary members face major choices in the next few hours: the European Central Bank (ECB) concluded that it will not be able to support Cypriot banks after Monday, the last day of the current bank holiday, if there will not be a proper agreement between the European lenders and Cyprus on a comprehensive adjustment programme that guarantees the viability of Cypriot banks and the sustainability of Cypriot public finances. Read more
Bruegel blog
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Options for Cyprus
22nd March 2013
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Effects of austerity revisited – how GDP surprised and why?
22nd March 2013
The debate about appropriate fiscal policy has been fluctuating since the onset of the financial crisis. Read more
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The Cyprus bailout controversy in German media and politics
22nd March 2013
We want to summarize reactions among politicians and German press views. The Eurogroup set up the details of a EUR 10 billion bailout package for Cyprus on Saturday, 16 March. This programme was heavily criticized in Germany, especially due to the tax on deposits below EUR 100 000. Yet, the Cypriot Parliament voted against this measure on Tuesday which is widely perceived as blackmail in Germany. Most commentators insists that Cyprus needs to come up with the agreed EUR 6 billion in order to receive the remaining sum from its European partners. Read more
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Europe’s Cyprus Blunder and Its Consequences
21st March 2013
The late Mike Mussa, a former Chief Economist of the International Monetary Fund, noted about some episodes of the late-1990s Asian financial turmoil that “there are three types of financial crises: crises of liquidity, crises of solvency, and crises of stupidity.” This quip comes to mind when considering the developments of the past few days around Cyprus. Read more
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No contagion from Cyprus so far
21st March 2013
The Cyprus drama has not destabilised the rest of the eruo area so far, despite the talks about a possible ‘Cyprexit’, i.e. an exit of Cyprus form the euro area. Read more
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Dramatic days ahead in Cyprus
20th March 2013
The Cypriot parliament's Tuesday evening rejection of the bank levy on bank deposits, which was a key condition for financial assistance from the EU/IMF and continued European Central Bank support to the Cypriot banking system, was dangerous. At stake are nothing less than a complete meltdown of the Cypriot banking system and a possibly uncontrolled exit from the euro area. Read more
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Cyprus deal: the right intentions but major flaws
18th March 2013
On Saturday morning, after a marathon meeting of the Eurogoup, it was decided to impose a one-time wealth tax on deposits in Cypriot banks: 6.75% on deposits below €100,000 and 9.9% on deposits above this threshold. Involving depositors was a wise decision and a wealth tax is a mild form of bailing-in, as I argued in a post last week. Read more
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Blogs review: GDP, welfare and the rise of data-driven activities
18th March 2013
What’s at stake: The worry today is not that investment in technology might not be as productive as we thought (the so-called computer paradox), but the fact that the economic value of the fast growing consumption and production of online data may not be adequately captured in official statistics. While GDP has always been an imperfect metric for welfare, a number of authors have wondered if this issue has not become worse in the information age. Read more
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To bail-in, or not to bail-in: that is the question (now for Cyprus)
14th March 2013
There is an intense debate on the possibility of bailing-in bank shareholders and lenders of troubled financial institutions (ie forcing investors to take losses), or relying on taxpayers to take the hit. Read more
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Recession calls on European Leaders to increase public investment
13th March 2013
The European Commission has rightly highlighted the need to adjust public finances in the South of Europe, in particular when market access is close to being lost. Yet now the discussion should focus on how to address the recession in the euro area. Germany will have to play a role. Read more