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.