Insuring Confusion

Yglesias writes a bit about Cyprus, the Euro, and the possibility of imposing currency controls. Some of it is good, but something stuck out for me. "To truly have a common currency you need common deposit insurance." In a word, no. We've had deposit insurance long enough now that people generally take it for granted, however it is not at all a necessary part of a banking system. There is a problem when for some reason people think that there can't be default anywhere inside a union, but the solution to that isn't to insure everything but to make it clear that you aren't doing anything like that. Insisting that no Euro-area country can default was one of the big causes of Europe's problems the last few years; it ddn't get them into the situation, but has severely hurt the cause of exiting it.