ECONOMY

JP Morgan warns of long-term damage of Cyprus deposit tax

The decision to adopt a deposit tax in Cyprus could have damaging consequences for banking in the eurozone periphery, JP Morgan Cazenove analysts warned on Tuesday.

They said that even if a revised version of the levy is approved by the Cypriot Parliament, the danger will not pass for Cyprus and other eurozone countries.

“In our opinion, there is a good case to say that the Cyprus crisis may blow over in the near-term, but the long-term breach of faith between Euro area policymakers and regional depositors will remain (even if the insureds are ultimately made whole),” the analysts said.

“Despite the muted reaction so far, Europe has reminded investors that there are significant problems behind the curtain.”