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Originally Posted by Osem
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The problems in Cyprus stem from Greece being allowed into the Euro. Cyprus was doing ok.
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Was Cyprus not doing quite well before the global financial crisis?
Yes. The International Monetary Fund described the country's economic performance before 2008 as a "long period of high growth, low unemployment, and sound public finances". There was a recession in 2009 but it was the mildest in the eurozone. But two interlinking factors have brought Cyprus close to default - the deteriorating government finances and the country's struggling banks.
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There have been losses on the loans to private borrowers because of the depression that has hit the Greek economy. And the value of the debts owed by the Greek government was cut in a debt relief exercise undertaken last year. It might have helped Greece, but the Cypriot banks were hit.
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The Cypriot banks and it's savers have already been taxed by the 'haircut' imposed by the EU.