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Commenting on Cyprus

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  • The bailout of Cyprus is attracting increased comment, much of it from Germany. German finance minister Schaueble suggested that Cypriot banks needed to shrink. A CDU member, however, suggested Germany was easing the terms of any bailout.
  • EU officials are also suggesting that the Cyprus bailout may be smaller than originally thought. Easier terms and a smaller bailout would potentially reduce the risk of contagion to other Euro area economies seen as being at risk of a bailout.
  • Liikanen of the ECB was suggesting that there was no alternative to austerity. Clearly there are alternatives - the Italians just voted for them. Although the general concept of alternatives to austerity may not always be the best economic option that does not mean that they can not create political strains.
  • The US is offering us retail sales data for February today, forecast at 0.5%. This is, however, largely a function of rising gasoline prices (as retail sales is a nominal not a real number), though we do see better real consumer pending as the year progresses.

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