Cyprus seems to have done the sensible thing, it's not perfect by a long shot but it is far better than the original proposal providing protection for a reasonable threshold of 100,000 Euro. There will of course be consequences and the usual dire warnings of calamity as per Iceland. Care will need to be taken that routes aren't found to transfer money out of the country, the normal game of buying expensive consultancy services etc as a way of transferring cash.
Despite claims otherwise, there is a reasonable chance that the Cyprus model will be re-used and the market will know this. Hence, expect GBP and other non Euro currencies to strengthen over the next few weeks and months as some take flight from the Euro. Of course, a strengthening GBP will reduce inflation issues in the UK (an import led nation) but will also result in weakening FTSE and house prices (aka London, we live in a distorted market) as the cheap Foreign capital which has propped it up will take profits.
Overall, this wouldn't be bad for the UK as the real economy might start to get a chance to recover, alas the BoE which is fixated on propping up the FTSE 100, house prices and the notion that money supply will solve all evils is bound to go on another round of quantitative easing. Everyone knows this, which is another reason why Foreign capital will take flight and then be back again as GBP weakens.
So here is hoping the BoE does something surprising and doesn't embark on more QE? Before you scoff, Cyprus seems to have embarked on something relatively sound ... why not the BoE? Oh, if we push the boat out we could start thinking Keynesian economics, a bit of wealth tax, a bit of ... wishful thinking.
I know, I know and you don't have to tell me. The BoE will just go for more QE because despite its spectacular failure everywhere else it has been tried, why let a little bit of data get in the way of dogma?
[Update 27th March 2013]
Now it seems we find out that the controls were inadequate and the high deposit accounts have been allowed to flee the country. A terrible mistake.
I know, I know and you don't have to tell me. The BoE will just go for more QE because despite its spectacular failure everywhere else it has been tried, why let a little bit of data get in the way of dogma?
[Update 27th March 2013]
Now it seems we find out that the controls were inadequate and the high deposit accounts have been allowed to flee the country. A terrible mistake.