Walking back from Cyprus | vox: On Friday 15 March 2013, European leaders trespassed on consecrated ground. They insisted that Cyprus impose losses – euphemistically dubbed a 'solidarity levy' – on insured depositors with Cypriot banks as a condition to receiving EZ/IMF bailout assistance. Entering Friday’s meeting, the leaders had four options on the table:
Give Cyprus a complete bailout (estimated to cost €18 billion).
Restructure the outstanding Cypriot bonds, €4.4 billion of which are governed by Cypriot law and €3.8 billion by English law.
Haircut excess deposits in the Cypriot banking system; that is, deposits in excess of the €100,000 minimum covered by the local deposit insurance scheme. These represent about half of the total deposit base.
Haircut the insured deposits.
None of these are pleasant.