BBC: One reason why the Cypriot bailout debacle matters - perhaps the main reason - is that it shows how far the eurozone is from the kind of solidarity which many believe essential to the currency union's long-term survival.
A simple solution to Cyprus's financial woes was on offer to eurozone governments. That would have been a 10bn euro direct injection of equity capital into Cyprus's weak banks by the European Stability Mechanism (ESM).
This would, in effect, have turned Cyprus's two biggest banks, Bank of Cyprus and Laiki, into the property of the entire eurozone; and it would have prevented the 10bn euros becoming an unsustainable liability of the financially overstretched Cypriot state.
This solution, of the ESM bypassing the balance sheets of national governments and directly recapitalising banks, was already rejected by finance ministers when a number of Spanish banks were close to collapse last year.
What was agreed for Spain is that up to 100bn euros would be lent to the Spanish state, for the purposes of strengthening its banks - with this 100bn euros, as it is drawn down, swelling the national debt.
But if eurozone finance ministers did not want to become direct shareholders in Cypriot banks, via the ESM, why didn't they replicate what they had done for Spain and simply lend what Cyprus's banks need to the government in Nicosia? » | Robert Peston | Wednesday, March 20, 2013
