Graham Bishop's Blog: Cyprus – over the brink? Sooner? Or Later?

19 March 2013

Whatever the twists and turns in the next few days, it is now very difficult to see a happy period for Cyprus in the next few years.

The decision by the Cypriot Parliament to reject the eurozone deal cannot have been an accident: not even the new President’s own party supported the revised plans. The Finance Minister has gone to Russia to seek new loans. Whatever the twists and turns in the next few days, it is now very difficult to see a happy period for Cyprus in the next few years.

• If the dalliance with Russia does not produce extremely substantial financial support in the very near future, 'catastrophic’ developments are likely unless the new Government can adjust policy very rapidly indeed to get back fully on track with Eurogroup’s offer.
• However, the probable unravelling of the business model pursued by the island for several years makes the medium-term outlook bleak – until/unless the natural gas comes ashore.
• But the financial appeal to Russia underlines the remarkable factors that are specific to this situation so there should not be significant contagion to other euro area states in the short run.

More

Rolling Blog

© Graham Bishop