A Eurozone deal may have been reached Monday to save Cyprus, but the saga is not over. Not in Cyprus where banks remain closed for fear of a run.
Not for countries in Europe where, the Wall Street Journal reports, political mistrust has grown between countries in the North and the struggling South.
And not in the U.S. for people like Steve Forbes, chairman and editor-in-chief of Forbes, who worries about the long-term impact this dealmaking process may have on confidence.
Before a final deal was done, Forbes penned a piece explaining why Cyprus could be a disaster for all of us, lamenting the attempt to seize depositors money. But with a final bailout agreed upon that saves insured depositors, is it less of a disaster?
“Not really,” he tells The Daily Ticker. “Because the idea’s out there that now in a crisis politicians won’t hesitate to seize any asset they can lay their hands on. So it just guarantees more fear in the future when a crisis comes, which it will come.”
The deal in Cyprus spares insured deposits, those of less than 100,000 euros. But deposits above that threshold at the two largest and most troubled banks stand to lose money.
Capitalism might suggest that these uninsured deposits would be lost when the bank fails.
In the accompanying video, however, Forbes makes the case that the government has “mucked things up” since the beginning.
He argues the senior depositors who stand to be wiped out should be first in line to get what’s left of the “good assets” at the “bad banks,” as the FDIC does in the U.S.