Capital controls may not stop mass exodus from Cyprus


Rabobank's Richard McGuire has suggested that the crisis in Cyprus will see capital flows out of the country slow to a trickle:

It is distinctly possible that confidence in the banking sector will not be restored by its imminent restructuring. This, in turn, raises the prospect of a run on the country’s banks as soon as they are allowed to re-open – although capital controls will likely see this a somewhat slow moving car crash. Nevertheless, this loss of confidence sees some very discernible possibility a further banking sector bailout might be required. The second reason is related but more economic in nature. This concerns the importance of the financial sector for the Cypriot economy. Even if capital controls are successful in stemming any possible outflow of funds from the banks (and, to the extent these controls are successful, the country at large) they will be powerless to affect the likely dwindling inflows.

But there is some suggestion that capital controls may not be enough to stop capital leaving the island: