Saturday 23 September 2017

Alan Wheatley: Cyprus rescue raises new questions about euro's long-term survival

Risk of widening north-south divide over austerity vs solidarity

ANGER: Protesters on the streets of Nicosia, Cyprus
ANGER: Protesters on the streets of Nicosia, Cyprus

Alan Wheatley

THE messy deal to bail out Cyprus has averted the latest threat to the break-up of the euro but at the cost of raising new questions about the single currency's long-term viability.

Savers in other euro zone banks appear so far to be taking the freezing of balances over €100,000 in Cyprus's two biggest lenders in their stride. Perhaps they judge that events in a tiny, far-away island with outsize banks and a reliance on deposits from Russian oligarchs hold little relevance for them.

Yields on Italian and Spanish bonds held broadly on Monday, reflecting a belief that the European Central Bank's promise to buy struggling euro members' bonds if need be - a programme known as Outright Monetary Transactions (OMT) - will prevent a spillover from Cyprus.

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