After Cyprus, a member of the 18-country euro zone, admitted that it could no longer afford to prop up its shaky banking sector, international lenders stepped, offering 10 billion euro ($14 billion) in assistance.
But by far the biggest slice of the country’s 23 billion euro bailout had to come from Cyprus itself. After chaotic negotiations with euro zone finance ministers, the European Central Bank and the International Monetary Fund, a so-called 13 billion euro “bail-in” was agreed. It proved to be controversial, with shareholders and bondholders bearing some costs of restructuring, including a levy on uninsured bank deposits over 100,000 euros ($136,000).
Authorities also imposed restrictions on bank transactions in an effort to avoid savers in the country’s banks immediately withdrawing their money – the last of which will be removed this spring.
“If you take a longer-term view and a Europe-wide view, I think that it was a disastrous thing for them to do because they undermined confidence in entire euro zone structure,” Christopher Pissarides, a Noble Prize winning economist and chairman of the Council of National Economy of Cyprus, told CNBC.
One year on, and Cyprus is not entirely avoiding the headlines.
Central Bank Governor Panicos Demetriades resigned earlier this week after a tumultuous year, and last Tuesday the island’s parliament approved a bill to privatize number of state-owned companies – one of the conditions of the aid package – just days after it had rejected an earlier version.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.