The Cypriot Crisis and the New Eurozone Policies
The Cypriot Crisis and the New Eurozone Policies

Summary/Abstract: The crisis in the Republic of Cyprus is mainly a banking crisis. For a number of years the banks enjoyed the benefits of foreign capital inflows, which allowed them to expand considerably abroad (mainly in Greece) and of course locally. The banks suffered enormous losses as a direct result of the haircut of the Greek sovereign debt and the deteriorating quality of their loan portfolio both in Greece and Cyprus, following the global economic crisis. The size of the financial sector relative to the country’s national income was such that the state was not in a position to bail it out. The widely held view that Cyprus acted as a financial centre for money-laundering of illicit Russian funds is an exaggeration at best and is contrary to historical facts and reports produced by competent international organisations. While cases of money laundering did take place and current practices in this regard certainly should be improved, the financial sector in general operated in a legitimate manner.

• Details
• Contents