FINANCIAL TIMES: The European Central Bank raised the stakes in the Cyprus crisis on Thursday, telling Nicosia it had until Monday to agree a bailout with the EU and International Monetary Fund or it would cut off emergency liquidity provision to the country’s banks…
The country’s two biggest banks, Bank of Cyprus and Laiki, are believed to be reliant on Emergency Liquidity Assistance provided by the Central Bank of Cyprus. The ECB’s governing council can terminate ELA if it believes the banks receiving it are no longer solvent.
The move, however, raises the prospect of the ECB having to make good on its ultimatum on Monday, which could leave the banks unable to honour their obligations. Some analysts have speculated that the collapse of the banks could trigger a series of events that lead to Cyprus leaving the euro, with unpredictable consequences for the rest of the eurozone... (more)
EDITOR We have long maintained that the very concept of the Euro is unsustainable due to the divergence in the economies and values of the membership. It would be ironic if the Euro falters, not because of Greece, Spain or Portugal, but tiny Cyprus. Perhaps the solution is two blocs, north and south, with currencies of different values, thus facilitating commerce among nations but consistent with the realitlies of their economies.
