Dutch Finance Minister Tanks Markets; Is Cyprus a 'Template' for Europe?

Newly elected Eurozone President and Dutch Finance Minister Jeroen Dijsselbloem
Georges Gobet | AFP | Getty Images
Newly elected Eurozone President and Dutch Finance Minister Jeroen Dijsselbloem

Dutch Finance Minister Jeroen Dijsselbloem (leader of Eurogroup Finance Ministers) helped tank the markets midday when he said that the Cypriot plan was a "template" for Europe.

What does that mean? It seems to mean that if a bank needs to recapitalize, it should go first to bondholders and shareholders, then to uninsured deposit holders...before they consider a bailout from the Troika (ECB/IMF/EU).

In other words, he is implying that uninsured deposit holders may now routinely be hit before any bailout, or at least at the same time as a bailout.

Whether or not Mr. Dijsselbloem's sentiment was accurate or not (I'm sure you will see "clarifications" shortly), this plays into the hands of those who have said this is a sea change in attitude.

Olly Burrows, who covers European banks for Rabobank in London, put the risk succinctly: "...this very real risk of bail-in should raise the cost of credit considerably. Can anyone say with confidence that further troubles in an already weak bank, or in a difficult economy, would not be treated in the same way? When Banking Union is in operation, all European banks will HAVE to be dealt with in a similar manner. Cyprus may be unique, but bail-in of Laiki is not. It is merely the first."

The idea of average citizens pulling money out of Italian and Spanish banks may be a bit more likely now, but the bigger risk is corporate money and further North/South polarization. Why wouldn't a corporation consider moving money from a southern European bank to a northern European bank, or to a U.S. bank?

By CNBC's Bob Pisani

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.