http://finance.yahoo.com/news/big-depositors-cyprus-lose-far-012924065.html
Cyprus' economy has been getting hit hard with losing large quantities of money from the bailout. There will most likely be a loss of 60 percent of savings in Cyprus banks. The European banks are struggling to keep up with it, but it's a small price to pay to save the island. The locals of Cyprus point fingers at Europe for turning their paradise into hell. The price tag on this bailout was set at about $13 billion which will take the Cypriots awhile to pay back. Cyprus seems to have handled the situation better than Greece with the frequent violent outbreaks on streets, instead they have peaceful protests by the students and bank workers. Cyprus has also limited the amount money locals and foreigners can take out of Cyprus to 1000 euros only. Cyprus is going to have long and possibly painful time of recovery.
The banks made a great decision by limiting the amount of money people can take out or else if people took out huge chunks of money out it would break the equilibrium of their economy making it even harder to recover from their crisis. This will only take time to recover from so they would need to be patient and plan accordingly to their day to day problem.
ReplyDeleteAnother aspect of this financial crisis in Cyprus that is worrisome is the concept of 'animal spirits' that we talked about in class. When it comes to consumers and businesses' investment pulling their economy out of the toilet, the idea that things are bad will help cause their outlook on the future to be more negative than it would have been without the financial crisis. This causes both of these groups to be more wary of what they do with their cash which would cause less activity in their economy.
ReplyDeleteCyprus's solution to meeting their bailout minimum is ethically wrong, but stealing their citizen's savings is a small scarifies compared to the what the effects to the global economy would be if they wouldn't have closed down the banks and taken the savings.
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