by John H. Makin
American Enterprise Institute
March 25, 2013
Economic Outlook
The banking system in Cyprus is currently in a state of crisis, only narrowly avoiding collapse through a recent agreement between the nation and the European Union (EU) and International Monetary Fund (IMF). The €10 billion rescue package includes the condition that Cyprus come up with a portion of the rescue funds through a tax—now called a “restructuring”—on deposits over €100,000 in the nation’s banks. Such a tax cripples Cyprus’s banks and frightens depositors in other debt-laden weak economies like Greece, Spain, Portugal, and Italy. Once again the EU, European Central Bank, and IMF “troika” has doubled down on a losing bet to rescue the eurozone from a breakup. They fail to acknowledge that Cyprus and Greece cannot be in a currency zone with Germany, Holland, and Finland.

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