The European Central Bank, the European Union, and the International Monetary Fund (the “Troika” to those of you who have been following European economic affairs) has announced its terms for the bailout of the banking system of Cyprus. Cyprus is not a big economy so most observers did not think that the bailout terms would be highly consequential. But the Troika has decided that the bank depositors should share in the pain of the bailout and demanded that a 10% tax be levied on all savings accounts. Needless to say, the depositors are not pleased and there was a run on the ATMs of the banks today. Monday is a holiday and there is speculation that a banking holiday will be declared for Tuesday in order to prevent a run on the banks that could force some to collapse. The danger is not that Cypriot banks will fail, but that depositors in banks of other precarious countries (like Italy or Spain) could fear a similar tax in the future and will begin to pull their money out of those banks as well. The futures markets all over the world are roiling right now and it should be interesting on Monday morning when they open for real.
As I indicated yesterday, there are many who are analyzing the decision to go to war with Iraq ten years ago. The British are going through a similar bout of introspection, and the general consensus is that the then-Prime Minister, Tony Blair, did not do a very good job of threat assessment or war planning. There is very little positive assessment of the war in most of the post-mortems I have read. Nonetheless, there are reports surfacing that the CIA is drawing up contingency plans for drone strikes in Syria. Somehow, some lessons are almost impossible to learn.
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