Cypress Banking Crisis
When most people think about Cyprus, they will think of a great tourist location due to its sun kissed beaches, historical sights and its robust culture. What most people don’t know is its economy has been under fire for years. Back in 2013, Cyprus was the fifth European Union (EU) state to ask for financial assistance from the European Commission, the European Central Bank and from the International Monetary Fund. Together these three are known as Troika. Cyprus tried to recover on its own, but ended up needing assistance. This led to possibly one of the most controversial Eurogroup decisions to ever take place, a seizure of funds from high funds depositors. This was intriguing to us as we were curious if the United States could adopt some form of this policy.
In 2008, Cyprus became the 14th member state of the EU to join the Eurozone. This meant that they abandoned the Cypriot Pound and adopted the Euro. The economy of Cyprus can generally be characterized as small, open, and dynamic, with services constituting its engine of growth. For the most part, the economy since Cyprus’s independence is what would be considered in the economic literature a success …show more content…
Conditions worsened for Cyprus as they had previously bought prodigious amounts of Greek bonds in attempt to bail Greece out of their economic crisis. As you can guess, the Greek economy crashed. They of course defaulted on their bonds, which was the final blow to the Cypriot economy. In response to the country’s deteriorating finances and serious risk of contagion from the Greek debt crisis, the Cypriot government implemented measures to cut the cost of the state payroll, curb tax evasion, and revamp social benefits, trimming the deficit to 4.2 percent of GDP in 2012. These measures, how- ever, proved inadequate, and in June 2012 Cyprus became the fifth Eurozone government to request an economic bailout program (Mediterranean Quarterly July 1,
When most people think about Cyprus, they will think of a great tourist location due to its sun kissed beaches, historical sights and its robust culture. What most people don’t know is its economy has been under fire for years. Back in 2013, Cyprus was the fifth European Union (EU) state to ask for financial assistance from the European Commission, the European Central Bank and from the International Monetary Fund. Together these three are known as Troika. Cyprus tried to recover on its own, but ended up needing assistance. This led to possibly one of the most controversial Eurogroup decisions to ever take place, a seizure of funds from high funds depositors. This was intriguing to us as we were curious if the United States could adopt some form of this policy.
In 2008, Cyprus became the 14th member state of the EU to join the Eurozone. This meant that they abandoned the Cypriot Pound and adopted the Euro. The economy of Cyprus can generally be characterized as small, open, and dynamic, with services constituting its engine of growth. For the most part, the economy since Cyprus’s independence is what would be considered in the economic literature a success …show more content…
Conditions worsened for Cyprus as they had previously bought prodigious amounts of Greek bonds in attempt to bail Greece out of their economic crisis. As you can guess, the Greek economy crashed. They of course defaulted on their bonds, which was the final blow to the Cypriot economy. In response to the country’s deteriorating finances and serious risk of contagion from the Greek debt crisis, the Cypriot government implemented measures to cut the cost of the state payroll, curb tax evasion, and revamp social benefits, trimming the deficit to 4.2 percent of GDP in 2012. These measures, how- ever, proved inadequate, and in June 2012 Cyprus became the fifth Eurozone government to request an economic bailout program (Mediterranean Quarterly July 1,