German finance minister Wolfgang Schäuble has said that the goal is now for all states to remain in the Eurozone. This follow a bailout deal for Cyprus that has seen renewed expectations of a Cyprexit. Schäuble stated that capital flight from Cyprus would be limited due to bank closures and that banks should reopen as quickly as possible. He said that talks on this would resume today.
This morning Archbishop Chrysostomos II, the head of the Cypriot Orthodox Church, called for the island to leave the common currency:
If the troika [of eurozone, IMF and ECB] is going to lead us into bankruptcy, it is better not to do any agreement and go directly to bankruptcy. At least we will save our dignity.
Ratings agency Moody's still believes that Cyprus could default and leave the euro. Douglas Carswell argues that a default would now be the best option for the troubled island:
“Default on debts!” you cry aghast. “Outrageous!” But the alternative would be even worse. It is a feature of all civilised societies that a debtor’s debts can, after a certain point, be wiped clean. The alternative would be to reduce those who have acquired unmanageable debts to the status of a serf or slave.
There comes a time when debts are less the liability of the person who borrowed, and more the responsibility of whoever lent the money. Cyprus is at that stage. Ordinary Cypriots should not be sacrificed to save foolish bankers from their own folly.
When the banks in Nicosia reopen, they should do so having stamped each euro note with a “Cyprus euro” sign. “But such Cyprus euros would be worthless compared to real Euros,” you retort.
But if the only way that Cyprus can be “saved” is to impose capital controls to prevent people moving their money off the island, does that not already mean that the value of a euro in Cyprus is well below that of a euro in the rest of the Eurozone? Capital controls in a monetary union? Does that not tell you that it is over?
And besides, devaluation is precisely what Cyprus needs if she is to recover. It was the massive devaluation of the Icelandic krona that allowed her to begin to export her way back to prosperity. It was the extraordinary good bargains that her currency collapse made possible that explain why outsiders have started to invest in Iceland once again.