The federal holiday that President Franklin Roosevelt declared for American banks in March 1933 may hold lessons for the euro area of 2013 amid the banking crisis in Cyprus.
In looking to the Great Depression, Nomura Holdings Inc. (8604) economists and strategists said that big crises can spring from small events. In the U.S., numerous reports show it was a 1933 Valentine’s Day bank holiday in one state, Michigan, that sparked a nationwide bank run. As with Cyprus, what counts is the ability of policy makers to maintain confidence elsewhere no matter what happens.
“Euro area policy makers might believe that Cyprus is not systemic,” said Nomura. “History shows that is exactly the opposite when depositors are involved.”