Euro Crisis Poses Grave Dangers to EU Unity

During a banking crisis, political leaders try to maintain calm to prevent panic and a run on vulnerable banks that can’t possibly return deposits to customers all at once. But a bailout for EU member Cyprus could fracture the calm by even suggesting new precedents, especially early proposals to tap into all bank depositors’ savings accounts and ignore guaranteed protections on holdings up to €100,000. The Cypriot banking industry overbuilt, based on reputation as an offshore tax haven, and then collapsed after investments in Greek bonds went bad. Thus, a population of 1 million required a €10 billion bailout. Confidence is low, and challenges divide the EU: “While many in the north question the willingness of politicians in Rome and Athens to bring about reform, citizens in the south are increasingly furious over the austerity diktats from Berlin, Brussels and Frankfurt.” High rates of unemployment and corruption are driving voter dissatisfaction with incumbent politicians and lending prominence to populists that present nationalistic policies. – YaleGlobal