There are four traits that UBS identified as common trends around the breakup of a monetary union. So has Cyprus (as is tirelessly pointed out, only 0.2% of the Euro area measured by GDP) set a course for the Euro’s destruction? Indeed, with Cyprus having checked the first three items on that list, while it has not left the Euro (yet), UBS concludes, "it may well be occupying a seat very close to the exit."
Via UBS: Is Cyprus Still In The Euro?
The four traits are:
- Monetary union break up is preceded by capital flight from perceived weak from perceived strong parts of the union
- Monetary union break up has tended to be regarded by governments as an opportunity for seizing cash or other assets held by citizens
- Capital controls tend to be imposed early in the break up, and foreigners’ asset holdings are often discriminated against
- Break up of a monetary union is normally associated with civil unrest and authoritarian government in at least some part of the former monetary union.
