Cyprus One Year After Bailout

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.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza