Forex Guides

Cyprus Shows Trust in ECB Is Misplaced

Ever since European Central Bank President Mario Draghi said last July that the bank will do whatever it takes to preserve the euro, complacency has pervaded Europe ’s single-currency area. Markets have weathered potential crises in Italy and Spain with surprising calm, secure in the knowledge that the ECB will save the day if needed.

This was always a false assumption, as events in Cyprus have made clear. There are significant limitations to the support the ECB is willing or able to offer, even to such a tiny island economy whose needs are easily affordable. The ECB relies on two primary mechanisms to help euro-area countries in crisis. The first, emergency liquidity assistance, allows a country’s banks to access cheap funding from their national central bank, even when all they have left is low- quality collateral that doesn’t meet the criteria for the ECB’s standard liquidity operations. This emergency facility has helped a number of countries make it through liquidity squeezes over the past few years, keeping banks in Belgium, Greece and Ireland on life support since the beginning of the crisis in 2008. The ECB has kept Cypriot banks alive in this way, too, providing about 9 billion euros ($11.6 billion) of financing to date. The ECB threatened to cut Cyprus off, however, if a bailout deal wasn’t agreed on with the so-called troika of international creditors — the ECB, the International Monetary Fund and the European Commission — by March 26. Capital Controls In response to the […]

Invest In Yourself And Get Premium Analysis
Less than 20 cents a day
Major Currency Pairs Analysis
Forex Sentiment Analysis
Understand The Market
10 days money back guarantee

View Subscription Options

Would you like to connect?
Get notifications on new forecasts and articles.

Sign up to our emailing list and get your FREE Stop Losing and Start Winning in Forex Checklist!

Trending Forex Articles

  • Cyprus Shows Trust in ECB Is Misplaced
  • EURUSD daily chartCyprus Shows Trust in ECB Is Misplaced
  • eur usd daily analysisCyprus Shows Trust in ECB Is Misplaced
  • Cyprus Shows Trust in ECB Is Misplaced
  • 3 ways how the economy may affect forex tradingCyprus Shows Trust in ECB Is Misplaced
  • Cyprus Shows Trust in ECB Is Misplaced