This is a rush transcript from "Special Report," March 25, 2013. This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP)
YIANNAKIS OMIROU, CYPRUS PARLIAMENT PRESIDENT: We have the decision from the Euro group. This decision is painful for the Cypriot people. This decision was in defeat of solidarity of social creation.
(END VIDEO CLIP)
SHANNON BREAM, ANCHOR: That's the president of the parliament in Cyprus talking about the deal they have reached. Here is how the U.S. treasury department is reacting today to this. In part they say, "it is critical to lay the foundation for a return to financial stability and growth in Cyprus. The European Central Bank commitment to provide liquidity is important in this regard. We will continue monitoring developments closely as details are finalized and the agreement is implemented."
Let's talk about it this with our panel. About what we know so far. Nina, ladies first this time. We understand that Cyprus will get $13 billion in emergency loans. But there are some strings attached in this deal.
NINA EASTON, COLUMNIST, FORTUNE MAGAZINE: It's a painful deal. There's no doubt about that. It could hurt the economy by as much as 10 GDP points. You're going to see more joblessness, you're going to see bankruptcies, and so on. But these banks were going collapse anyways and the economy was going to be in shambles anyways.
There is a lot of concern that the depositors are hurt, because what is happening is that if you have more than 100,000 in euros in a bank, those are targeted to help with the bailout, some $4.2 billion. A lot of that money is from Russians and Russian oligarchs, foreigners, and so forth. But there's a lot of hue and cry about that.
I think frankly, it's a good thing because I would call this a bail-in instead of bailout. In that you've taken a model where you are forcing the bank to save itself the shareholders, the bondholders, and then go to the uninsured depositors are the ones that have to rescue this institution. In some ways it's a lesson we might want to take here. Rather than have taxpayers bailouts you have bailout from within the institution. I understand all the pain, but I don't think it's a bad idea.
BREAM: Yeah but you float the idea of going after people's saving accounts and that doesn't resonate with many folks.
EASTON: Right, but they weren't insured. They weren't insured over $100,000. Just as here they aren't over $100,000. You know, you know when you put something in a bank like that, I covered the savings and the loan crisis back in the '80s. And people got hurt in uninsured accounts in those days.
BREAM: And of course, Charles, the first thing that people think when they hear about it somewhere else they think, is it coming to the U.S.? The ripple effects to all of these deals and financial burdens.
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It is not going to happen here because when we had our crisis in '08 and '09, everybody was insured and the banks were saved. So even if you had over the insured amount it was secure.
But what is amazing here, I think, is how small Cyprus is and how relatively small the problem is. The bailout total that you mentioned is about a quarter of Apple's cash on hand. This is one country that Apple could purchase.
BREAM: Maybe, they could, rename it.
KRAUTHAMMER: They could own the island and call it iCyprus or something, and have all this cash left over.
(CROSSTALK)
But the ripple effect is this. It isn't on an American depositor. It's on a depositor in Spain or Italy which are sort of next in the list, with insolvent banks. Also people are going to worry, well, perhaps they will come after me, because remember, the first agreement on Cyprus was that everybody took a haircut, including the local and small depositor. The Russian gangsters were hit, who cares? But it would have been a Cypriot butcher. That's another deal.
So there are people in Spain and Portugal – well, not in Portugal, it's already been bailed, Spain, Italy, other countries with very weak economies. And if you get either a run on the banks or a refusal to actually deposit in the banks, those are going to go under as well. So it's very complicated. This is only a Band-Aid and next will be a larger country.
BREAM: Juan, Charles doesn't feel bad for the Russian gangsters. [INAUDIBLE] But there are Russian officials speaking out calling this stealing. They are very upset.
JUAN WILLIAMS, SENIOR EDITOR, THE HILL: Sure, it is stealing.
KRAUTHAMMER: They would know about stealing, the Russians.
BREAM: They're speaking from experience, according to Charles.
WILLIAMS: But it does boil down to confiscating the money of these Russian oligarchs who have their money in these Cypriot banks and who essentially are being told, you know what, you are going to help bailout not only Cyprus but you're going to help in terms of this IMF deal.
Now, if you think about the European Union , you think about the IMF, you think about the ripple effect we just heard from Nina and Charles about potential impact in places like Spain, then you start to think about, well, wait a second, if Europe is -- I think they are the number one trading partner for the United States. If in fact, Apple or somebody else says, you know what, we don't have a market there. The European economy is collapsing. The euro, that very new instrument of a European union, and it's part of this whole globalization, if that collapses, what does that say about the state of the global economy? We are not insulated against these global impacts. And it could have a terrible impact on our very fragile recovery.
BREAM: I mean Nina, this is a last minute deal, and people are talking about negotiating through the night and getting to something, and the sigh of relief. But what is the downside?
EASTON: Well, the downside -- let's go back to what could have happened, and the banks would collapse anyways and they would have lost their uninsured deposits anyways. So that's important.
And to your point of this being a regional thing, it's also important to remember they were feeling the regional effects. Part of their problem was holding Greek debt. And so you do see a ripple effect. I think Charles is right in that you will see a ripple effect in some of these other countries like Spain. I think it continues to move out. And it is a threat hanging out there for the U.S. economy always. We went through a period where it seemed like things were calming down there. But I think we're going to continue to see these hiccups. I think it's pretty -- this Cyprus thing is pretty contained for now, though.
BREAM: How linked are we, though? A global economy these days, Charles, it seems like every, you know, flare-up that we're going to see out there, it's going to impact all the other players. And there are so many dominoes.
KRAUTHAMMER: Well, there are in Europe. And it could be that the euro is not sustainable or it could split into a southern euro where the weaker countries with looser regulations and then the northern one, anchored by Germany. It could go any way. But before it reaches us it's got to go through a lot of ripples. I think we are pretty well insulated.
BREAM: In the meantime, don't forget Charles has proposed iCyprus.
KRAUTHAMMER: It would be a great campus for Apple.
(LAUGHTER)
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