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The Weigh-In: Why Does Cyprus Matter?

cyprus

The European Union is once again facing a significant financial crisis as Cyprus has pushed Greece, Portugal, Italy and Spain from the headlines. How can such a small country – with fewer than one million citizens – have such a large impact on the global economy? The answer is complicated, much like the March 25 bailout agreement between the troika – the European Union, the International Monetary Fund and the European Central Bank (ECB).

The agreement with the Cypriot government paves way for Cyprus to receive a €10 billion bailout. In return, Cyprus has agreed to downsize its large financial sector and undertake a macroeconomic adjustment program that will require fiscal consolidation, structural reforms and privatizations (among other concessions). In return, the ECB will continue to provide emergency liquidity assistance to Cyprus banks.

Read the rest of this post in the UST Newsroom

Lalith Samarakoon is professor and chair of the Department of Finance in the Opus College of Business. As a financial economist, Samarakoon has two decades of advisory experience in financial sector reforms and development, and public debt management. He teaches Global Finance Issues and Policy: Eurozone Debt Crisis.