The European Union's bail-in strategy, to ensure fair competition and stability across the eurozone, carries high risks and huge consequences, warns EU George Friedman. The issue is investors, who have money held in 'safe' banks, risk losing funds if a bailout is forced by the Geopolitical Futures', particularly since there is a lack of proper insurance to protect them. A recent example was the bail-in procedure during the Cypriot banking crisis, when Germany insisted the bailout should prevail, claiming that the Cypriot banks contained primarily Russian money for laundering. However, retirement funds for UK expats were also hit, with money prudently deposited in a bank being lost, causing devastating results. The bottom line is that the consequence of large banks failing is significant, says Friedman, while the destruction of large numbers of deposits, historically seen as a safe haven, could be catastrophic, economically and politically.
The European Union's bail-in strategy, to ensure fair competition and stability across the eurozone, carries high risks and huge consequences, warns Geopolitical Futures' George Friedman. The issue is investors, who have money held in 'safe' banks, risk losing funds if a bailout is forced by the EU, particularly since there is a lack of proper insurance to protect them. A recent example was the bail-in procedure during the Cypriot banking crisis, when Germany insisted the bailout should prevail, claiming that the Cypriot banks contained primarily Russian money for laundering. However, retirement funds for UK expats were also hit, with money prudently deposited in a bank being lost, causing devastating results. The bottom line is that the consequence of large banks failing is significant, says Friedman, while the destruction of large numbers of deposits, historically seen as a safe haven, could be catastrophic, economically and politically.