Capital controls may be imposed on Cyprus

Sky's Ed Conway:

Allister Heath on the dangers of capital controls:

In Exit, Voice and Loyalty, the sociologist Albert O Hirschman pointed out that members of an organisation (such as a country) who are dissatisfied can either protest by using their voice (voting, demonstrating or arguing) or by exiting (removing themselves or their money). Eliminating the free movement of capital makes the second option unviable; even if the freedom of movement for people is maintained, many Cypriots will become prisoners in their own island, unable to leave without having also to abandon their savings and assets.

With the banks shut – apart from the ability to withdraw as little as €100 from bank ATMs – there are, of course, already crippling capital controls of sorts in place. It is not possible for Cypriots to move money down the street, let alone to another country. But the imposition of formal restrictions on removing cash from the country would mean the euro ceasing to be a truly single currency. Imagine if one couldn’t move money from London to Birmingham, and that there were therefore for all intents and purposes a series of regional pounds: sterling would no longer be a unified currency. Similarly, a Cypriot euro would no longer be a proper, fully-fledged euro, regardless of what the Eurocrats would like the rest of us to believe, at least for as long as these capital controls remain – and like all bad, oppressive laws, they will have a tendency to live on forever.

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