The New York Times asked me to write a piece for them on whether the deposit tax in Cyprus was a mistake. Below is what I submitted, though if the final version appears, it may be significantly altered. Enjoy.
The Cypriot banking system is insolvent. Heaping private losses onto taxpayers is bad public policy. Let's start with those two statements, because starting there makes clear that forcing losses onto bank creditors was the only choice in Cyprus. The question goes to which creditors and using what standards. That's where the problem lies.
In the past, the European Union has provided funds to help recapitalize severely damaged banking sectors in at least three other countries: Greece, Ireland, and Spain. In each case, the sovereign bore the lion's share of the burden of bank recapitali...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.