Optimistic about the Eurozone - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 30 March 2013
PRINTER FRIENDLY | ARCHIVES
Optimistic about the Eurozone A  A  A


- 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.

Receive Our Best Research Literally Forever! (Offer ends at midnight of 31st March)

The registrations to our lifetime service Equitymaster's Wealth Alliance, which we open rarely, are set to close at 11:59 PM of 31st March.

As you may know already, a membership to Equitymaster's Wealth Alliance will entitle you to:

Lifetime access to 4 of our most-popular Stock Research Services,
Lifetime FREE copies of Equitymaster's Stock Market Yearbook,
Lifetime FREE access to our Intelligent Portfolio Tracker,
Lifetime admission to Equitymaster webinars with renowned investment experts
Plus much more!

...all for just Rs 950 a year!

And if you act right away, you also get a Rs 5,000 loyalty bonus for signing up!

So why don't you just go ahead and give Equitymaster's Wealth Alliance service a try?

With our 30-day, 100% moneyback guarantee on this offer, you have absolutely nothing to worry about.

Click here to sign up...

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!

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "Optimistic about the Eurozone". Click here!

5 Responses to "Optimistic about the Eurozone"

manmohan

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.

Like 

Prabal Biswas

Mar 31, 2013

A complicated stuff explained in extremely simple way
Thank you

Like 

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.

Like 

JOE.

Mar 31, 2013

GOOD TOPIC AND SIMPLY EXPLAIN THE CURRENT SITUATION, OTHER THAN ANY ECONOMIC NEWS PAPERS. THANK U.

Like 

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).

Like 
  
Equitymaster requests your view! Post a comment on "Optimistic about the Eurozone". Click here!

Recent Articles:
Deep State First
August 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
A Darkness Is Spreading Across the US
August 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working
August 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Trump Takes a Beating
August 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.