The government of Cyprus and the European Union reached a solution to that country’s crisis. But is the cure worse than the disease?, Is Europe One Step Closer to Financial Crisis
Bank depositors in Cyprus awakened to a new reality. That country’s government finally reached an agreement with the European Union to receive over 10 billion euros in bailout funds. As part of the agreement, all bank accounts at the countries’ two largest banks that hold over 100,000 euros will suffer significant losses.
There are several serious consequences. No one may take out more than $380 per day from the account. No check will be cashed. No one may leave the country with more than 1,000 euros. As banks reopen in the country, many people will be asking if this solution is better or worse than the problem it’s trying to solve.
These actions will have far-reaching repercussions, including for small-business owners in the United States. Bank account owners in larger countries like Spain and Italy have taken notice and are beginning to transfer funds to other countries. This will lead to potential banking crises in those countries as well. And because more small businesses depend on export sales for growth, this situation in Europe will make it far more difficult and more risky to sell to companies there. Many European companies that purchased from U.S. businesses will also need to cut back, given the slowing economy in their region. With less sales coming from Europe, where can business owners turn to?
