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Colm McCarthy: Shocking treatment of Cyprus has exposed eurozone's inherent flaws

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ANGER GROWS: A Russian depositor of Cyprus Popular Bank holds a placard that reads, ‘we won't be Germany's slaves’, during a rally by employees of the bank outside parliament
in Nicosia last week. The Cypriot central bank denied reports and frantic rumours that stricken Cyprus Popular Bank, the island's second-largest lender, is to be closed down

ANGER GROWS: A Russian depositor of Cyprus Popular Bank holds a placard that reads, ‘we won't be Germany's slaves’, during a rally by employees of the bank outside parliament in Nicosia last week. The Cypriot central bank denied reports and frantic rumours that stricken Cyprus Popular Bank, the island's second-largest lender, is to be closed down

ANGER GROWS: A Russian depositor of Cyprus Popular Bank holds a placard that reads, ‘we won't be Germany's slaves’, during a rally by employees of the bank outside parliament in Nicosia last week. The Cypriot central bank denied reports and frantic rumours that stricken Cyprus Popular Bank, the island's second-largest lender, is to be closed down

The Cypriot crisis provides two reasons to be jealous of those EU countries which chose to remain outside the eurozone. The first is that it was poorly designed, as is now acknowledged even by the designers. The second is that it has been managed in such an amateurish fashion. The shambolic handling of the Cypriot request for a bailout, first made last summer, is further evidence of mismanagement. This was not a poor decision made on the hoof under severe time pressure. This was a designer cock-up eight months in the making, and could readily have been avoided.

The essential design flaw in the eurozone is that it is not really a monetary union; it is just a common currency area, lacking the essential feature that ensures financial integration, namely a banking union. The latest piece of mismanagement over Cyprus makes the attainment of a banking union, on which progress has been negligible, even more difficult.


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