A Strange Bank Holiday

The bank holiday continues in Cyprus. Banks are closed.

And people continue to withdraw money from their accounts as rapidly as possible.

That sounds more than a little strange. But in a way it is representative of what has gone on in Cyprus over the last couple of weeks. Everyone wants to fix things, but hard decisions are to be avoided.

It is obvious that once you tell people you will â€" or may â€" impose a one-time tax on bank balances, people will try to get their money out before the tax hits. So the authorities declare a bank holiday. But they would hate to inconvenience anyone, so they order the banks to keep some cash machines functioning.

As a result, we get to see pictures of lines at banks. Just like in the bad old days before deposit insurance in the United States.

Cyprus has deposit insurance, on balances up to 100,000 euros. If the banks are failing, why not close them down and try to meet that obligation That would amount to a potential 100 percent tax on balances above the line, and the Cypriots would hate to offend the rich Russians who seem to have a lot of accounts. So they try to hit small depositors as well, establishing the unfortunate precedent that in Europe deposit insurance is not really real.

Who will blink Will Cyprus knuckle under to European demands Will the European Central Bank make good on its threat to cut off the banks Maybe we will find out on Monday.