Cyprus linkfarm II

I left off this chronology/linkfarm on Friday morning (eastern time) March 22, mentioning tough talk from Germany at that time. So we resume there.

That was also the morning when Greek banks swooped in to buy the units of Cypriot banks that operated in Greece. For some reason this seemed to calm world markets.

A bit later Friday, an EC spokesman, Simon O'Connor, announced "an improved spirit of cooperation on the part of the Cypriot authorities." Its parliament passed a law allowing it to restructure the failed Laiki Bank, separating some of its assets into a so-called "bad bank." Under this plan, uninsured depositors would lose up to 40 percent o their savings, though the insured deposits would remain protected within the "good" bank.

But this still left the question of raising the bail-in money that the Troika demanded. And by this time the crisis in Cyprus had analysts wondering about the next domino. One emerging markets researcher, Tim Ash, nominated Slovenia for that honor. But the head of Austria's central bank pooh-poohed the idea of contagion.

With the question of the bail-in still unsettled, Cyprus president Nicos Anastasiades announced late Saturday that he would be meeting with European honchos in Brussels in mid-morning Sunday. That meeting was then put off until the late afternoon, apparently so a larger number of honchos could be there.

A deal seems to have emerged late Sunday, or very early Monday. Cyprus is going to raise the bail-in money from uninsured depositors and bank bondholders. The deal is designed so as not to need further legislative action.

The usual sighs of relief are being exhaled. Felix Salmon writes, "the two main vectors of contagion -- hitting insured deposits, and exiting the euro -- have been avoided."

But on Monday, March 25, Sir Mervyn King of the Bank of England, issued a caution, "There will surely be many twists and turns before we can truly say that the crisis is indeed over."

That he was right had become obvious by Wednesday, March 27, with the banks of Cyprus still closed, except for such limited withdrawals being permitted via ATMs. The government committed to opening them at last the following day, but did so only in conjunction with elaborate capital controls, that will prevent people from doing what they think best with their money. Indeed, so expensive seem the capital controls that they make of the Cypriot euro in effect a new currency. Cyprus has withdrawn from (or been kicked out of) the Eurozone, though nobody official is putting it that way.

As David Keohane of FT Alphaville puts it, these capital controls "make a mockery of the idea of a currency union."

Wow. I've included 12 distinct links on the Cyprus situation in this blog entry, and I had 15 others in yesterday's entry. This is one-stop shopping for all my fellow Cyprus obsessives then.

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