If This Economist Is Correct, Then The Value Of A 'Cypriot Euro' Could Be Weak For Years

This is an interesting comment found in Greek newspaper Ekathemerini:

“Thanks to political mismanagement, we now have a first: capital controls in the eurozone,” said Nicolas Veron, a senior fellow at Bruegel in Brussels and a visiting fellow at the Peterson Institute for International Economics in Washington. “How long is temporary? It could turn out like Iceland, extending to many years.”

Since the Cyprus deal last weekend, there’s been a lot of talk about how in a sense Cyprus has already left the Eurozone. That’s because in a regime where there’s capital controls — laws that prevent people from quickly moving their money out of a bank — a euro in a Cyprus bank isn’t worth what a Euro in a German bank is worth. You’d much rather have your money in a German bank, where there’s no limits on withdrawals or transfers.

If we’re talking about capital controls for years, then that really means bad news for the ‘Cypriot Euro.’

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