"Nothing to see here. Move along."
That was the message from European Central Bank (ECB) boss Mario Draghi at his press conference last week.
Draghi, clearly keen to draw a line under the Cyprus panic, argued that the eurozone would begin to bounce back within a few months. He gave only the vaguest hint that he might loosen monetary policy.
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As a result, the euro has remained steady against other currencies. In fact, with Japan embarking on a money-printing spree, it's even strengthened a little.
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But don't be fooled. The deal over Cyprus is already coming undone, and other countries look set to follow.
The time for Draghi to 'put up or shut up' on his promise to save the euro is fast approaching and you don't want to be holding the single currency when it does
Cyprus needs to raise another €6bn
Former German chancellor Helmut Kohl recently admitted that there is no way that Germany would have joined the single currency had there been a popular vote.
This is hardly a situation unique to Germany. The progress of the eurozone project has been one long sorry tale of voters being ignored and sidelined by ambitious political elites.
However, now that they're in the euro, voters from Greece to Italy have backed away from the chance to exit the single currency. You can understand why. While quitting the euro might speed these countries' recoveries in the longer run, savings and pensions would take a big hit.
But a turning point might be approaching. Cyprus is being asked for even more money to contribute to its own bail-out.
Here's a quick reminder of the story so far. Cyprus was thought to need around €17bn to bail out its banks and keep its sovereign debt at bearable levels. The troika (Europe and the International Monetary Fund(IMF)) were only willing to lend €10bn.
So Cyprus needed to raise the rest itself. And that's why it ended up deciding to pinch a load of money from people with big deposits in its banks.
Trouble is, the Cypriot government made such a mess of organising this bank levy that lots of large depositors managed to get their money out of the country. Meanwhile, because of the damage to its banking sector, the Cypriot economy is expected to shrink severely in the next few years.
In all, this means the cost of the bail-out has now risen to €23bn. And team IMF is not prepared to chip in any more money.
In other words, Cyprus has to find another €6bn. Nothing is out of bounds it seems, with the country potentially having to sell three-quarters of its gold reserves, valued at €400m, to help raise the money.
But that's just €400m. Where's the rest going to come from? "Depositors and bank bondholders", that's who, says Jonathan Loynes at Capital Economics. Given that Cyprus is already so tightly squeezed, it must be getting to the point where leaving the euro is no worse than staying within it.
And these aren't problems that can be kicked down the road. Due to the revenue raised from tax being lower than previously thought, Cyprus will go bankrupt unless it gets an infusion of cash in less than a fortnight. It is by no means certain that a deal will be agreed before this happens.
The Cypriot fear is starting to spread
Meanwhile savers and bondholders in other eurozone countries are starting to worry that they will suffer a similar fate to those in Cyprus. It's a domino effect with haircuts in one country leading to panic about another.
The fact that the troika has refused to step in automatically to protect banks is a big worry for small countries with outsized, or broken banking sectors. The latter group includes Estonia, Luxembourg and Slovakia. But the two most immediate concerns are Slovenia and Malta.
Most experts agree that Slovenia's banks are a mess. Over one in seven loans are "non-performing", (ie, have little hope of being repaid). This means the government will either have to bail them out, or force depositors to take losses.
Combined with the deficit, a bail-out could see Slovenia's debt rise by at least 15% of GDP. Because of this, the yield on Slovenian bonds has begun to spike upwards by nearly 2% in the last fortnight alone.
Another problem case is Malta. Like Cyprus it has a huge banking sector (equivalent to seven times GDP). While some of this is due to banks using it for the purposes of moving money between their individual sub-groups, this still represents a substantial risk.
As Capital Economics points out, there are few bank bondholders to bear the brunt of any losses. This means that depositors could be hit if there is a crisis.
On top of all this, there's the other significant problem that the eurozone economy is incredibly weak. GDP for the region is expected to shrink both this year and next. The larger countries are suffering too - France is expected to go into recession, while even Germany will stagnate.
It looks to us as though the ECB is going to be forced to follow Japan's lead and boost the money supply aggressively. In other words, sooner or later, expect money-printing in the eurozone. And that's why we'd suggest you avoid the euro and euro-denominated bonds.
However, we're happy to buy beaten-down eurozone shares (via Italy for example - iShares FTSE MIB (LSE: IMIB)) for the same reason that we're happy to buy Japanese shares we expect the gains to outweigh any losses on the currency side.
This article is taken from the free investment email Money Morning. Sign up to Money Morning here .
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