Of all the many steps that the euro area has taken to contain its debt crisis, the decision to force ordinary savers in Cyprus to contribute to their country’s bailout is the worst.
We’ll have to wait and see whether this breach of the principle of deposit insurance triggers a run on the banks of other endangered economies, such as Greece and Spain. Yet even if no contagion results, Europe’s governments have knocked a supporting wall from beneath their financial system. As today’s to safety in markets shows, the euro-area crisis is center stage once more.
