In March 2013, Cyprus experienced an acute crisis surrounding the terms of an agreement to receive financial assistance from the European Union and the International Monetary Fund. The original proposal, which included a bank deposit levy on Cypriot bank account holders, was rejected by the country’s parliament. A renegotiated deal was then accepted which limited the bank levy to deposits above €100,000. This page collates our coverage of the crisis from both before and after the bailout agreement.

April 2013

The lesson from Cyprus is that large bank deposits are potentially at risk in other struggling Eurozone countries

The Cyprus crisis is likely to generate a number of political and economic problems for the country in the short term. Charles Goodhart assesses the impact on Cyprus’s economy and the fallout from the bank levy imposed on large depositors at Cypriot banks. He argues that although the potential for contagion to spread to other Eurozone countries has not yet been realised, the consequences for the European banking system could be severe.

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To avoid another Cyprus style crisis, the EU must understand how it helps to create tax havens

The recent Cyprus crisis has thrown the problems posed by tax havens into sharp relief. But what determines which countries become tax havens? Achim Kemmerling argues that tax havens tend to occur when small countries stand to benefit from aligning their legal framework with that of a larger country. For countries such as Cyprus, EU accession and the adoption of the EU’s legal framework has greatly aided the transition to tax haven status.

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The Cyprus crisis has shown the growing dysfunctionality of the Eurozone

Reflecting on the recent crisis in CyprusVassilis Paipais and Eirini Karamouzi write that the imbroglio over the county’s banks shows both the difficulties currently faced by the eurozone and the power of Germany in Europe. They argue that the crisis has also brought to the surface real antagonisms over wealth inequalities in the eurozone, and warn that the increasing polarization between the European north and south may signal the beginning of the end for EU integration.

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March 2013

The Cypriot banking crisis shows that Europeans have yet to work out the answer to the question, ‘who pays?’

The past week has been a tumultuous one for Cyprus, with negotiations and renegotiations towards a bailout for the country’s embattled banks. While an agreement has finally been struck, Iain Begg writes that the crisis is a direct result of an over-extended banking system: something that also affects other Eurozone members. The solution, to make bank depositors pay, could undermine confidence in the Eurozone’s banking system.

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The crisis in Cyprus not only threatens the Cypriot economy, but might also undermine the country’s relations with key partners and allies

On Monday, the Cypriot government agreed a €10 billion bailout deal with the European Union and the International Monetary Fund, following a week of uncertainty and controversy. James Ker-Lindsay writes that while the situation has damaged Cyprus’s economy, it has also had a significant impact on the country’s relations with its neighbours and partners. Russia and Israel, who had both developed close associations with Cyprus, may scale back their involvement in the aftermath of the crisis, leaving the country’s place in the geopolitical order much more uncertain than it was a week ago.

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Europe’s Cyprus blunder raises important questions about the nature of EU decision-making and crisis management

The EU, IMF and European Central Bank have agreed to a bailout for Cyprus that would involve a levy on the country’s bank deposits. The terms of the bailout were met with surprise and fury in Cyprus and across Europe, and were also rejected by Cyprus’s parliament. Nicholas Veron writes that no matter the outcome, the crisis is likely to cause lasting damage to the trust of Eurozone households in the banking system, and to the EU’s plans for banking union.

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The Cyprus fiasco has all the hallmarks of a classic ‘whodunnit’

Cyprus’s parliament has rejected a proposed agreement to levy €5.8 billion from Cypriot bank accounts as part of the country’s bailout deal. Sony Kapoor argues that despite the extremely negative reaction to the proposal, the other options facing Cyprus are no more appealing. Seeking assistance from Russia through the gas company Gazprom might generate long-term complications for the country, and the collapse of the Cypriot banking system would have far more severe consequences than the proposed bank levy.

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Cyprus is the latest casualty of Germany’s ‘one size fits all’ solution to the Eurozone crisis

On Tuesday the Cypriot parliament rejected an international bailout deal aimed at keeping the country’s struggling banks afloat. The most controversial part of the agreement was a proposed €5.8 billion deposit levy on Cypriot bank deposits. Adonis Pegasiou writes that the agreement, pushed for by Germany, may create a precedent that will see a fall in confidence in other countries in Southern Europe. He argues that the measure shows that Germany should not be allowed to impose its desired solutions on struggling European economies

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February 2013

Following a litany of failures, few will miss Cyprus’ outgoing president, Dimitris Christofias

With a view to the 2013 Cypriot Presidential elections, James Ker-Lindsay writes that history will not be kind to outgoing president, Dimitris Christofias – and rightly so. Over the course of the past five years he has presided over the failure of yet another round of UN peace talks aimed at reuniting the island, oversaw the collapse of the island’s economy, and was blamed for a major disaster.

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In Cyprus, the Troika should be promoting health reforms towards universal coverage, not derailing them

Last November, the Troika agreed a Memorandum of Understanding with Cyprus, which also made special reference to the country’s health sector. In the lead up to the 2013 Cypriot Presidential elections, Jonathan Cylus, Irene Papanicolas and Mamas Theodorou argued that some of the key recommendations of the Memorandum, such as eliminating access to healthcare at reduced rates, and increasing some fees, threaten to undermine efforts towards Cyprus’s goal of universal health coverage.

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Note:  The above articles give the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.

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