At this hour, I’m reading that a deal has been reached by the Cypriot president and the Euro officials to bailout their banks in exchange for an up to 40% levy on deposits of above €100,000. Two things about this:
• Apparently, this deal didn’t require ratification by the Cypriot parliament. The EU has shown not only its disdain for democracy, but now for representative democracy.
• The strict capital controls in Cyprus are antithetical to the fundamental principles of the European Union—supposedly, it’s “Four Freedoms” are the free movement of goods, capital, services, and people within the EU’s 27 member states. This will distort the value of the Euro within Cyprus and make it different than inside.
So, to recap, an undemocratic deal undermining the founding purposes of the EU was reached to keep a single currency stable, under the control of bureaucrats in Brussels and bankers in Frankfurt.
UPDATE: Tyler Cowen (Econ. Prof. George Mason Univ.): “8. The capital controls will have to be strict. What will the price of a Cypriot euro be, relative to a German euro? 50%? I call this Cyprus leaving the euro but keeping the word “euro” to save face. And yet they fail to reap most of the advantages of leaving the euro, such as having an independent monetary policy.”