Optimistic about the Eurozone

Mar 30, 2013

- By Asad Dossani, Author, The Lucrative Derivative Report

Asad Dossani
Over the last few weeks, a lot of talk in the global markets was regarding the crisis in Cyprus. This was the latest turn in the European debt crisis. Cyprus was close to going bankrupt, and after tense negotiations between various lawmakers across countries, they reached a bailout deal for the banks.

What is good about this bailout deal is that large investors and depositors in the bank have shouldered a large share of cost of the bailout. Effectively, small savers and depositors have been protected, and this is at the expense of larger depositors and bondholders.
Why is this a good outcome? It is good because the people who make the risky investments should bear the consequences if things go wrong. In the Greek debt crisis, the initial bailouts did not impose any pain on Greek bondholders or large investors in Greek banks.

Unfortunately, this type of bailout did not address the underlying problems that the banks were insolvent to begin with. The debt needed restructuring, and bondholders needed to take the hit. Eventually, this did occur. The last time the Greek crisis was in the news, they agreed a restructuring that now meant the Greek banks were finally solvent.

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When it comes to Cyprus, the right course of action has been pursued from the start. Rather than the goal of saving bondholders, the bailout has been designed to protect small retail depositors and ensure the solvency of Cyprus' banking system. There is no doubt that there is still a ways to go before we know if the Cyprus issue is solved, but so far this week markets have been calm and there has been little fallout from the crisis.

The Cyprus bailout deal is a good reason to be optimistic about the Eurozone's prospects in the long term. Yes, it is true that highly indebted countries remain, and many previously bailed out countries are suffering serious recessions. But, the risk of a crisis is now much lower than it was.

Even with Cyprus, the market reaction was much smaller. We expected that the crisis would be solved, and so far it has been. Once an economy is no longer facing an immediate crisis, they can start to pursue long-term reforms and policies to improve growth and employment. The Eurozone appears well positioned to take this opportunity.

is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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5 Responses to "Optimistic about the Eurozone"


Apr 1, 2013

Excellent out of box thinking. I fully agree & endorse your views, Asad. Your perspective is more objective and gives a different insight to solution for Cyprus bailout.


Prabal Biswas

Mar 31, 2013

A complicated stuff explained in extremely simple way
Thank you


Rajiv Phadke

Mar 31, 2013

It is early to conclude that the Cyprus solution is the best. Forcing Large depositors to share the losses from bad Investments of local Banks, will lead to flight of such funds to safer countries.... This can be a disruptive for banks/economies of peripheral EU countries.



Mar 31, 2013



Abhay Dixit

Mar 31, 2013

I personally do not think that elected politicians can take harsh measures to displease majority voters. The one who takes extreme position to the left will win next election, taking country down the socialistic road. Democracy has failed( after 200-250 years) the way socialism failed(after 70 years).

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