Understanding of the financial crisis in Cyprus: its effects and the post crisis strategy.

Abstract

This paper focuses on Cypriot economy with a special emphasis on the effects and aftermath of the financial crisis that it has gone through. An overview of the island’s economy and its key elements will help to get the thorough understanding of what had gone behind the screen. Cypriot banking system in general and the situation around the globe that helped shape the crisis will form part of the project. Situation around Europe, Admittance into EU and ultimately Euro played an equally important part in the financial crisis history of the country. Banking operations and especially the expansion program devised by the biggest banks will be criticised. Early symptoms and Cypriot entry into the financial difficulty will be highlighted along with all the other factors that contributed to the ultimate demise of the huge banking empire. The crisis period will form a part of the paper with all the relevant factors be considered. European Union’s part and other unfortunate events will be analysed throughout in the later area of this paper. Greek bonds and Cyprus’ reliance on Greece will be evaluated extensively as this area is at the core of the whole financial crunch and will help understand the story of the troubled nation. Much criticized bailout package will be discussed and the Economic Adjustment program initiated by Cypriot Government in the close collaboration with the European authorities will be highlighted in detail. Cypriot connection and similarities with other European countries which went through the similar financial phase after entry into the Euro will also be written about. Ultimately the current situation and the recovery route will be discussed along with the current performance of the government and other sectors.