Cyprus Bailout Deal: The Current State of Affairs

Abstract

The Republic of Cyprus was the last victim of the Eurozone crisis. The Eurozone crisis knocked the door of Cyprus due to the overexpansion of the Cyprus banking sector, ineffective supervision, regulatory problems, excessive public deficits and the ‘haircut’ of the Greek State bonds in a previous bailout agreement. After a first agreement including a bank levy for all insured and uninsured bank depositors of Cyprus banks was rejected by the Cyprus House of Representatives, the Eurogroup, the European Commission, the European Central Bank and the International Monetary Fund reached a second bailout agreement for Cyprus.1 A Memorandum of Understanding on Specific Economic Policy Conditionality (MoU) was signed subsequently. On 30 April 2013, the MoU was ratified by Cyprus and came into effect.