As I indicated three months ago, the IMF now supports capital controls in specific and extraordinary circumstances, particularly in view of its experience in Iceland. The pre-condition is that the controls be "targeted, transparent, and generally temporary". This is now relevant given the situation in Cyprus. Matina Stevis and Michalis Persianis of Dow Jones have learned that EU and ECB officials are now working on a contingency plan for Cyprus which includes capital controls. Likely, they would go into place as soon as Cypriot banks re-open for business.
Here is what Dow Jones has to say about the controls specifically - note the part about a "bad bank":
After Tuesday's no vote, the ECB issued a statement reaffirming its commitment to provide liquidity to banks "as needed within the...
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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.