The Cyprus Debt: Perfect Crisis and a Way Forward
The Cyprus crisis is one of the most complex in the Eurozone -although in absolute terms it is a minor crisis. An analysis of the ongoing developments from different perspectives leads to the conclusion that we are witnessing a perfect storm of a financial crisis at the confluence of sovereign debt and banking crisis together with debt overhang of business and households and a severe decline of competitiveness. As a result Cyprus has amassed a large external debt that cannot be repaid, no matter what fraction of the country’s real domestic economic output is appropriated through austerity measures. Hence, fiscal austerity leads to deflationary stagnation and alone does not work. We advocate a policy response that addresses multiple dimensions of the problem with policy options of (1) austerity deleveraging, (2) structural reforms, (3) financial innovations, (4) selective privatizations and (5) debt restructuring. These options are drawn from lessons of what worked well, and what not, in crises of other countries and these lessons are summarized in lieu of conclusions. A postscript discusses the potential impact of the Eurogroup decision of March 2013 on the Cyprus crisis.
Volume (Year): 7 (2013)
Issue (Month): 1 (June)
|Contact details of provider:|| Postal: P O Box 20537, 1678 Nicosia|
Phone: + 357 22892429
Fax: + 357 22892426
Web page: http://www.ucy.ac.cy/goto/ecorece/el-GR/HOME.aspx
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jaakko Kiander & Pentti Vartia, 2011. "Lessons from the crisis in Finland and Sweden in the 1990s," Empirica, Springer, vol. 38(1), pages 53-69, February.
- repec:oup:restud:v:81:y:2014:i:2:p:725-760 is not listed on IDEAS
- Carmen M. Reinhart & Kenneth S. Rogoff, 2010.
"Growth in a Time of Debt,"
NBER Working Papers
15639, National Bureau of Economic Research, Inc.
- Stephany Griffith-Jones & Krishnan Sharma, 2006. "GDP-Indexed Bonds: Making It Happen," Working Papers 21, United Nations, Department of Economics and Social Affairs.
- Oleg Itskhoki & Gita Gopinath & Emmanuel Farhi, 2011.
2011 Meeting Papers
406, Society for Economic Dynamics.
- Emmanuel Farhi & Gita Gopinath & Oleg Itskhoki, 2011. "Fiscal Devaluations," NBER Working Papers 17662, National Bureau of Economic Research, Inc.
- Farhi, Emmanuel & Gopinath, Gita & Itskhoki, Oleg, 2014. "Fiscal Devaluations," Scholarly Articles 12336336, Harvard University Department of Economics.
- Emmanuel Farhi & Gita Gopinath & Oleg Itskhoki, 2012. "Fiscal devaluations," Working Papers 12-10, Federal Reserve Bank of Boston.
- Emmanuel Farhi & Gita Gopinath & Oleg Itskhoki, . "Fiscal Devaluations," Working Paper 70976, Harvard University OpenScholar.
- Farhi, Emmanuel & Gopinath, Gita & Itskhoki, Oleg, 2011. "Fiscal Devaluations," CEPR Discussion Papers 8721, C.E.P.R. Discussion Papers.
- Ken Miyajima, 2006. "How to Evaluate GDP-Linked Warrants: Price and Repayment Capacity," IMF Working Papers 06/85, International Monetary Fund.
- Michael Keen & Ruud A. de Mooij, 2012.
"Fiscal Devaluation and Fiscal Consolidation: The VAT in Troubled Times,"
IMF Working Papers
12/85, International Monetary Fund.
- Ruud de Mooij & Michael Keen, 2012. ""Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 443-485 National Bureau of Economic Research, Inc.
- Ruud de Mooij & Michael Keen, 2012. "'Fiscal Devaluation' and Fiscal Consolidation: The VAT in Troubled Times," NBER Working Papers 17913, National Bureau of Economic Research, Inc.
- De Grauwe, Paul, 2012. "The Governance of a Fragile Eurozone," Walter Adolf Jöhr Lecture 2012, University of St. Gallen, School of Economics and Political Science, Institute of Economics (FGN-HSG).
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009.
"This Time Is Different: Eight Centuries of Financial Folly,"
Princeton University Press,
edition 1, volume 1, number 8973.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009.
"Varieties of Crises and Their Dates
[This Time Is Different: Eight Centuries of Financial Folly]," Introductory Chapters, Princeton University Press.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates
- Thomas Herndon & Michael Ash & Robert Pollin, 2013.
"Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff,"
wp322, Political Economy Research Institute, University of Massachusetts at Amherst.
- Thomas Herndon & Michael Ash & Robert Pollin, 2014. "Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff," Cambridge Journal of Economics, Oxford University Press, vol. 38(2), pages 257-279.
- Sofronis Clerides, 2012. "Competition, Productivity and Competitiveness: Theory, Evidence, and an Agenda for Cyprus," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 6(2), pages 81-88, December.
- Vagliasindi, Maria, 2008. "Governance arrangements for state owned enterprises," Policy Research Working Paper Series 4542, The World Bank.
- Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
- International Monetary Fund, 2010. "Some Uncomfortable Arithmetic Regarding Europeâ€™s Public Finances," IMF Working Papers 10/177, International Monetary Fund.
- Helene Schuberth, 2011. "Lessons from the crisis in Finland and Sweden in the 1990s by Jaakko Kiander, Pentti Vartia: Comment," Empirica, Springer, vol. 38(1), pages 71-76, February.
- Paul De Grauwe, 2012. "The Governance of a Fragile Eurozone," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 45(3), pages 255-268, 09.
- Ashoka Mody & Damiano Sandri, 2012.
"The eurozone crisis: how banks and sovereigns came to be joined at the hip,"
CEPR;CES;MSH, vol. 27(70), pages 199-230, 04.
- Damiano Sandri & Ashoka Mody, 2011. "The Eurozone Crisis: How Banks and Sovereigns Came to Be Joined At the Hip," IMF Working Papers 11/269, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:erc:cypepr:v:7:y:2013:i:1:p:3-45. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Shekersavva)
If references are entirely missing, you can add them using this form.