A further escalation of the crisis in tiny Cyprus may have global implications well beyond the immediate market reactions today. It could influence the course of fiscal policy in the UK and monetary policy in the US, sap appetite for the “Abe trade” in Japan, and revive safe haven demand for gold. What’s more, the return of fears that one or more countries may actually leave the euro-zone altogether could lead to a sustained correction in the prices of riskier assets generally.
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