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Taking Depositors Money to Fund Bailout Packages has broken a Taboo; Risking Worldwide Loss of Confidence In The Banking System & Panic Moves
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Fears Emerge Over Impact of Cyprus Bailout
Jon Mawby, senior portfolio manager at GLG Partners, said: "In the medium term this could be one of the key policy errors of the entire crisis, affecting the reaction functions of populations across Europe."
Chris Iggo, chief investment officer in global fixed income at Axa Investment Managers, said: "The potential for a complete loss of confidence in the financial system is huge."
"You can imagine some career euro bureaucrat thinking 'We tried that in Cyprus and it seemed to work; let's try it in Portugal,'" he said.
Marcus Ashworth, head of fixed income at Banco Espirito Santo, said the plan was "quite unnecessary" and not worth the EUR7 billion saving for core euro-zone countries. "They've breached a huge taboo for a relatively small amount of money in the scheme of things,"
"The real test of the Cypriot package is going to be how depositors in the weaker peripheral countries now react. I think this could be something the politicians have sorely underestimated," he said.
"Expropriation of depositors is an aggressor act, so one should expect retaliation," wrote Ashworth in a note earlier today.
[link to online.wsj.com]
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