Cyprus: The Troika’s new approach to resolving a ﬁnancial crisis in a Eurozone member state
The diﬃcult ﬁnancial situation of the Republic of Cyprus is the latest problem thus far in the European debt crisis or so-called ‘Eurozone crisis’. The Cyprus crisis, which started in 2012, led the island to the brink of ruin. While the 2008 global ﬁnancial crisis and its consequences hit other European countries hard, the Cypriot economy was only slightly aﬀected by these events. Although in the following years, small declines in some of the main economic indicators (e.g. in the ﬁelds of tourism and the property market) were recorded, there were no reliable data indicating that the government was facing the threat of bankruptcy. The causes of the Cypriot ﬁnancial crisis are manifold, and the approach employed by the international donors to resolve this crisis diﬀers from the measures implemented in the other aﬀected European countries. In the ﬁrst section of this chapter, a short historical overview of relevant
developments in the Republic of Cyprus is presented. This is followed by a closer examination of the political and economic changes on the island that triggered the domestic crisis. The next section explores the planned measures and the mode of implementation suggested by the Troika. Subsequently, the impact these measures had on the government and society over 2013/14 is analysed, followed by an outlook for 2015. The chapter closes with a short conclusion.