This septic
isle
Being tough
on bank creditors could prove costly for northern European taxpayers
The
Economist
Mar 30th
2013 |From the print edition
THE second
deal to bail out Cyprus
was much better than the first. For one thing, there was actually a deal: with
the €10 billion ($13 billion) loan the prospect of the euro zone’s first exit
has receded. An agreement among euro-zone finance ministers to wind up Laiki
Bank, Cyprus’s
second-biggest bank, and restructure Bank of Cyprus, the largest lender on the
island, undid the worst elements of the initial botched agreement. Savers with
accounts below the €100,000 deposit-guarantee threshold will be spared. Losses
will hit creditors of weak banks in line with the normal hierarchy:
shareholders and junior bondholders first, followed by senior bondholders and
uninsured depositors.