Wednesday, March 27, 2013

Euro zone overestimates ability to curb contagion: Moody's

The euro zone's awkward handling of Cyprus's bailout has put extra pressure on the bloc's downgrade-threatened sovereign ratings and shows policymakers are overestimating their ability to contain the crisis, Moody's has warned.

Cyprus clinched a 10 billion euro bailout from international lenders this week, but its terms have broken with past taboos by seizing up to 40 percent of the cash held in the island's banks by wealthy individuals and firms.

Market analysts fear it could set a dangerous precedent for future rescue efforts and could make the region more prone to bank runs if depositors in other debt-strained countries think their money is no longer safe.