Papadimitriou on the Cyprus Crisis

Yesterday, Dimitri Papadimitriou joined Ian Masters to discuss the response to the banking crisis in Cyprus.  The plan on the table, in which Cypriot banks would impose a deposit tax (9.9 percent on deposits above €100,000, and 6.75 on deposits below that) in order to gain access to a €10 billion bailout from the troika, unconscionably makes small depositors pay for someone else’s regulatory blunders — and is likely to be ineffective anyway, said Papadimitriou.

The entire episode once again points to the fundamentally unworkable setup of the eurozone, in which each member-nation is (ostensibly) responsible for its own banking system.  For more on these deeper structural problems, see this policy note:  “Euroland’s Original Sin.”

Listen to the interview here.