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Another shameful day for Europe as EMU creditor states betray South

So much for the denials. The Cyprus “template” for banking crises is to be eurozone policy for other countries after all.

by Ambrose Evans-Pritchard, The Telegraph:

Anybody with serious banking exposure to any EMU state on the front line of Europe’s macro-economic crisis now knows what to expect.

The deal reached by EMU finance ministers on the use of the bail-out fund (ESM) to recapitalise distressed banks makes clear who will in fact suffer the real losses: first shareholders, then bondholders and then deposit holders above €100,000. They stand to lose almost everything, as we saw with Laiki in Cyprus.

Officials from the European Central Bank and the European Commission warned during the Cyprus crisis that it would be dangerous to set such a precedent, fearing contagion. The Portuguese were openly alarmed.

So has that risk of contagion since dissipated? One should have thought quite the opposite, given the yield spike in Portugal, Spain, Italy et al since the Bernanke Fed dropped its taper bomb this week.

Read More @ Telegraph.co.uk

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