The situation in Cyprus has gone from bizarre to laughable to chaotic in just a matter of days, but the question I asked a few days ago remains on the table: Is Cyprus unique? Are investors buying the sales pitch that whatever happens, it has no larger meaning for Europe’s other troubled economies? Ryan Avent says yes:
The most striking thing about the situation is that broader markets are taking assurances that Cyprus is a unique case at face value. European equities are flat for the week, and yields on peripheral sovereign debt have scarcely budged. Contagion looks like a non-issue. For that, at least, we can be thankful. Unless it leads to European Commission complacency, of course, leading officials to drive an even harder bargain—and possibly precipitate the sort of action, like a Cyprus exit, that might just send markets into a proper swoon. Things, we should have learned by now, can always get worse.
As with everything to do with the EU economy, there are no good answers for Cyprus. Just bad answers and (we hope) slightly less bad answers. So far, though, it looks like Cyprus’s woes aren’t affecting Spain or Portugal or Greece. They still have intractable problems that appear nearly impossible to solve, but at least they haven’t gotten any more impossible over the past week.