Capital controls in Cyprus will harm growth and liberty

Huge numbers of bad loans have been made by Cyprus, including to the Greek government. Bad debts should be recognised and investors should take the consequences so that an orderly restructuring and winding-up of banks can be undertaken. The rest of the Eurozone should not get involved in this process. A case can be made for temporary controls on bank withdrawals to stabilise the situation while haircuts on deposits are made and legal restructuring is undertaken. But these controls must expire after a few weeks. The only role the EU should play is to expel Cyprus from the euro – and ultimately the EU – if it maintains capital controls beyond the end of May.

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Source: http://www.iea.org.uk/blog/capital-controls-in-cyprus-will-harm-growth-and-liberty

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