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On June 28th 2012, the small island of Cyprus became the fifth government to request an economic bail-out from the Eurozone after losing access to international capital markets. Less than a year later, a €10 billion second rescue deal was agreed upon — an unprecedented agreement that bailed in creditors of Cyprus' two largest banks, and triggered an economic crisis that the nation still struggles to recover from today.This resourceful collection of essays provides a thorough and in depth analysis of how Cyprus reached the point of failure and what lessons this experience holds for future economic crises. The various perspectives collectively address unanswered questions, including whether the bail-in can be considered successful, why the recession was less severe than expected, and what conclusions can be drawn about stress-testing exercises across borders.Focusing on one of the (proportionately) largest crises in financial history, the case study will prove essential to policy-makers and politicians, especially in the euro area.

Cyprus

International Monetary Fund. European Dept.

Published: 2018-12-03

Total Pages: 16


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This Selected Issues paper identifies key challenges among households in reducing nonperforming loans (NPL) further in Cyprus, namely, low repayment capacity, particularly among a certain group of debtors; and weak repayment discipline owing to strategic behavior. Despite some revival of lending activity, the role of bank credit as a funding source remains limited. External inflows, drawdown of savings, use of own funds, and unpaid debt service obligations are contributing to financing economic activities, but these sources may not be sustainable over the medium term. Addressing NPLs to lower borrowing costs and reviving credit supply will be important for supporting longer-term growth. Since 2017, bank credit has provided only a moderate amount of new financing. The reduction in credit-to-GDP ratio has been almost entirely achieved by NPL write-offs and sale or transfer of loans out of the banking system, and through denominator effect. As of 2017, credit demand appears moderately strong, in line with robust economic growth, while credit supply remains broadly unchanged, reflecting continued risk averseness by banks. These trends suggest that while deleveraging is expected to continue through clean-up of bank balance sheets, growth in credit flows (pure new loans) are likely to remain at a moderate level until NPL recovery and repayment discipline improves significantly.
Ireland entered the COVID pandemic with reduced vulnerabilities and high growth, especially in multinational enterprises (MNEs)-dominated sectors. The pandemic has had a highly asymmetric impact on the economy. The domestic sectors contracted by about 10 percent in 2020 and unemployment reached 30 percent at the peak of the first wave, while MNEs continued to grow strongly, driving overall GDP growth to 3.4 percent. A swift policy response has been effective in mitigating the crisis impact and protecting households and firms. The domestic sectors are expected to partially recover in 2021, with GDP growth projected at 4.6 percent. Downside risks stem from uncertainties surrounding new COVID variants, post-Brexit trade arrangements, and likely changes in international taxation.
This book tells the inside story of those who played key roles in setting up the organisations and combatting the crisis. In exclusive interviews, global financial leaders and ESM insiders provide a rich stock of perspectives and anecdotes that bring to life the urgency of the crisis as well as the innovative solutions found to resolve it. The European Stability Mechanism and its temporary predecessor the EFSF provided billions of euros in loans to five hard-hit euro area countries during the European financial and sovereign debt crisis of the early 2000s, helping to safeguard the stability of those countries and the euro area as a whole. Initially, the crisis-torn euro area was ill-equipped institutionally, but the rapid establishment of the firewalls, the assistance programmes, deep‐seated country reforms, the strengthening of European institutions, and extraordinary European Central Bank measures shielded Europe from a euro area break-up. With the EFSF/ESM set-up, its managers aspired to create a new, more entrepreneurial international financial institution, one that is agile enough to respond quickly to new challenges, while still ensuring the strict governance befitting an organisation pursuing a public mission. The euro area has emerged from near disaster in more robust shape. As Europe strives to further strengthen its architecture in preparation for any possible future crises, it is important to reflect upon how the euro area reinvigorated its fortunes and draw the relevant lessons for future crisis management in Europe and beyond.
This monograph provides a comprehensive analysis of the political economy of the Turkish Cypriot governance in the northern part of Cyprus after 1974. Examining the political and state structure, labour market, social security, state economic enterprises and allocation of land, Ekici shines a light on the turbulent history of North Cyprus. What is its relationship with Turkey and the South? How does economic development compare across Cyprus? Who are the potential perpetrators of post-1974 developments? Such questions are addressed in this much-needed book. As a self-proclaimed internationally unrecognised state, neglected by the international community and scholarly literature, this book marks an important development in the study of North Cyprus and Turkey's role in its economy and politics.
This book tells the story of the euro crisis in Cyprus from the inside. Written by the former Governor of the Central Bank of Cyprus, Panicos Demetriades, who was in office during this turbulent period, this book shows how the crisis unravelled through a series of key events that occurred during his tenure. Written in chronological order, and broadly based on the author’s personal diary, starting from his first day in office, this volume brings together economics, banking, regulation, governance, history, politics and international relations. Presenting personal witness statements, including records of noteworthy telephone conversations, informal meetings and other milestones, it examines crucial questions like: How did Cyprus become so systemically important to the rest of the euro area? Why was Cyprus treated so differently in comparison to other peripheral countries in Europe? Why were bank depositors targeted? What role did Cyprus’ links with Russia play in the design of the programme? What has been the toxic fallout from the bail-in? Are there any longer-term implications for the euro? What are the lessons for regulators around the world? The book will appeal to readers interested in financial crises, the euro’s architecture, the evolution of the European Monetary Union, and those with an interest in how Europe and the IMF dealt with crises in peripheral European countries.
The book examines the evolution of the political, social and economic life of Cyprus from its conquest by Richard the Lionheart to the 1950 referendum on Enosis. Even with such a long period, around 900 years, the interest in controlling the island becomes clear given its particularly advantageous geographical position between Europe, Africa and Asia. Undoubtedly, Cyprus has always been an important centre for military and economic activity in the wider region. This book provides an interdisciplinary approach which combines history, political science, sociology, international relations and economics. It will be of interest to academics in Economic History, Middle-Eastern Studies, Mediterranean Studies and researchers in general, as well as anyone interested in political theory and the role of the state in particular.
Most of the Cypriot population, especially the lower classes, remained loyal to the British cause during the Great War and the island contributed significantly to the First World War, with men and materials. The British acknowledged this yet failed to institute political and economic reforms once the war ended. The obsession of Greek Cypriot elites with enosis (union with Greece), which only increased after the war, and the British dismissal of increasing the role of Cypriots in government, bringing the Christian and Muslim communities closer, and expanding franchise to all classes and sexes, led to serious problems down the line, not least the development of a democratic deficit. Andrekos Varnava studies the events and the impact of this crucial period.
This study considers the maritime economy of ancient Cyprus from 1450 BC to 295 BC, combining, for the first time, three distinct disciplines, that is History, Archaeology and Economic theory. The principles of New Institutional Economics are used to trace the island’s institutions and their continuity and to reconstruct its maritime history.