Abstract
On Monday, 18 March 2013, when financial markets around the world reopened, there was a noticeable reaction to the news of the deposit levy in Cyprus . The Guardian , for example, reported heavy losses in Asia, smaller losses in Europe and a fall on Wall Street by 60 points, all attributed to the news of the unprecedented deposit levy in Cyprus . Bloomberg , which provided more comprehensive coverage, was reporting a fall of the euro and a rise in Spanish and Italian bond yields . The uncertainty that had been created started raising questions about the euro ’s survival.
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Notes
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Not surprisingly we were not short of offers to advise us on how to leave the euro . One of them was from a highly respectable think tank based in London.
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With hindsight, the remarkable improvement in the public finances during that period owed a lot to the property bubble that had been fuelled by excessive credit growth. During 2004–2010 total assets in the banking system were growing at an average rate of 24% per annum. Credit growth peaked during Sarris’ term of office, as a result of which Cypriot firms and households became the most heavily indebted in the world. For more details see Chap. 17.
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The obligation to introduce resolution legislation that was in line with the Bank Recovery and Resolution Directive was part of the November 2012 agreement with the troika . The drafting of the bill required several months of work by the ministry of finance in close collaboration with the CBC , the Commission, the ECB and the IMF . It is worth noting that the bail-in tool was added to the bill in its very final stages.
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At some point in the conversation the potential ‘benefactor’, who visited me in my office at the CBC with the former mayor, revealed that he had fallen from the first floor of his house and had damaged his head but was fine now.
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MP’s subsequently criticised the CBC for including a member of the troika in the technical delegation that briefed Parliament about the legislation.
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Demetriades, P. (2017). Heading Towards the Abyss. In: A Diary of the Euro Crisis in Cyprus. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-62223-1_12
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DOI: https://doi.org/10.1007/978-3-319-62223-1_12
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