(Reuters) - A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region's finance ministers said.Later on, Mr. Dijsselbloem attempted to retract his statement by tweeting that Cyprus was merely a "specific case." One can only guess if his recantation was made after seeing markets trade off after his comment or because the template idea was only his own thought, not the consensus among European finance minsters. Arguable, Mr. Dijsselbloem's slip was much less damaging than his predecessor, Jean-Claude Juncker, who famously quipped,"when the going gets tough, you have to lie." However, Mr. Dijsselbloem must quickly learn that the markets hates surprises. If Cyprus were to serve as the template, then by all means let the market know and be prepared. If it is indeed a "specific case," those in charge must be adamant even if you are not so sure you can really guarantee such outcome.
"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck."If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders," he said.
Meanwhile, in the US, home prices are up and durable goods orders were robust. As the world burns, will the power of US consumers extinguish the flames abroad or will the US economy fall victim to world contagion? Many have offered guesses, but only time can tell.
No comments:
Post a Comment