SocGen’s ultra-bearish analyst Albert Edwards has his take on Europe post-Cyprus.
His prediction: Yes Europe is going to break up and yes, Cyprus is a worrisome template.
The Troika have managed to exponentially increase concerns on how safe retail deposits are in the eurozone. It matters not that the final Cypriot bailout plan did not touch smaller savers unlike the original proposal of a 6¾% tax (haircut) for ALL deposits under 100,000 in ALL banks (including foreign bank subsidiaries). The fact that this plan was originally sanctioned, despite deposit insurance, will have shaken small saver confidence to the bone. It certainly has shaken my confidence. I know from first-hand experience the extreme difficulty for a European citizen to open an account in another European country it is nigh on impossible for the man in the street. If Joe Sixpack in Spain or Italy or wherever is thinking the Troika are circling their country in the future, it is entirely rational, as Mervyn King suggests, to panic! (The Bank of England Governor, Mervyn King once said it was not rational to start a bank run but rational to participate in one once it has started.) But euro-Joe Sixpack is left with the choice of stuffing his money under the mattress or buying safe financial assets (maybe overseas mutual funds or gold?), or indeed spending the money on goods and services.
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