This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Cyprus Points to Euro Folly

Stocks in this article: BACCJPMWFC

NEW YORK ( TheStreet) -- The Cyprus bank "bail-in" shows why it's better for some European countries to have their own floating currencies.

As many economists have said over the past several years, having a common currency without having common economic policies is a recipe for long-term uncertainty. The saga of Greece's bailout seems never ending, as internal political events periodically threaten previous bailout agreements, which could force Greece to leave the euro.

The events in Cyprus this week show that the northern countries that are part of the common European currency, especially Germany, are not willing to bail out the outsized banking sector of a member country that has touted itself as a tax haven.

Cyprus secured 10 billion euros in bailout assistance for its beleaguered banking sector in a deal that allows Cyprus Popular Bank -- the island nation's second largest bank -- to fail, with its performing assets folded into the Bank of Cyprus. Depositors in both of the nation's largest banks will take losses initially estimated at roughly 30% on balances above 100,000 euro, while smaller deposit accounts will be unaffected.

The good news is that depositors will at least not see their insured deposits subject to a "stability levy," which was part of the original Cypriot bank bailout plan.

The Eurogroup -- made up of the finance ministers of nations that have adopted the euro common currency -- said in a statement that the bailout deal for Cyprus "will be an appropriate downsizing of the financial sector, with the domestic banking sector reaching the EU average by 2018." The Eurogroup also said the 10 billion euro bailout and the decisions taken by the Cypriot government will allow the nation's "debt to remain on a sustainable path."

Cyprus is paying a huge price to stay in the euro. While many of the depositors with uninsured balances taking the huge haircuts live outside the country, there is likely to be a huge negative effect on the island nation's economy, as those foreign depositors will no longer see Cyprus as a safe place to park cash.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,828.24 +0.49 0.00%
S&P 500 2,067.56 -5.27 -0.25%
NASDAQ 4,791.63 +4.3130 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs