Christopher Pissarides remarks on the Cyprus bailout

Nobel prize winner and member of the Cyprus Economic Council, Christopher Pissarides writes his remarks about the Cyprus bailout in an article in the Financial Times

He explains that Cyprus does not have the same problems as Greece despite their affinity which was recently emphasized to him by the celebrations of the presidential election.

Cyprus’s problem is much more manageable and the 8 times larger deposits compared with the GDP is still smaller than the one in Luxemberg and similar to Maltanad Ireland. Troikas approach to haircut all deposits including 100000 euros to shrink the large banking sector so quickly was an aftermath of the Greek bond haircut. The initial intent before the Greek haircut was to shrink the banking sector by 50% in a period of five years.

The rapid decision to impose a haircut (or levy) on all deposits with the threat of turning of the ELA (Emergency liquidity assistant) is what troubles Mr Pissarides.

He accuses the Euro-zone leaders of insulting the vision of the founders of the monetary union and acting in a way that is very confusing to everyone.