Counting the options in Cyprus: the good, the bad and the ugly

First, let’s clarify that a bailout for Cyprus was necessary. Without this, the major banks in Cyprus would collapse in a matter of days, if not hours. People would lose their savings, financing of small and large businesses would come to a halt, panic would spread across markets and the public, and a tremendous crisis would engulf the real economy (with lost jobs, incomes, and people’s fortunes). The ECB could delay this, by continuing to provide liquidity to the Cypriot banks, but this would not offer a long-term solution.