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Reverse gear?

  • The Eurogroup of finance ministers has thought about things and decided that Cyprus might be allowed to have some flexibility in the terms of its raid on bank deposits - provided that the money raised is not affected. A Cypriot government spokesman says parliament is unlikely to pass the package of measures.
  • ANY deposit grab on deposits below EUR100,000 (even on a reduced scale) will set a precedent that could easily fuel panic in any future banking crisis in the Euro zone. Recent events demonstrate the Euro area's repeated prioritising of politics over economics.
  • If the Cypriot parliament fails to pass the package of measures today there will have to be an attempt at renegotiation - but the position of Cypriot banks is such that they will almost certainly have to remain closed during any renegotiation.
  • The calendar today includes bill auctions in Spain and Greece. The UK has inflation numbers (probably too soon for sterling to have any impact). Germany offers the ZEW economic expectations survey and the US has housing data.

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