Proposal to Address the Current Crisis in Cyprus

3 Pages Posted: 25 Mar 2013  

Sofronis Clerides

University of Cyprus - Department of Economics; Centre for Economic Policy Research (CEPR); University of Bologna - Rimini Center for Economic Analysis (RCEA)

Antonis A. Ellinas

University of Cyprus - Department of Social and Political Sciences

Irene Karamanou

University of Cyprus - Department of Public and Business Administration

Alexander Michaelides

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Andreas Milidonis

University of Cyprus - Department of Accounting and Finance

George Nishiotis

University of Cyprus - Department of Accounting and Finance

Costas Xiouros

BI Norwegian Business School

Stavros A. Zenios

University of Cyprus; University of Pennsylvania - Wharton Financial Institutions Center; Norwegian School of Economics

Date Written: March 23, 2013

Abstract

The Cypriot banking system has suffered a severe blow last Friday night, after the results of the Eurogroup meeting were announced. Life in the banking system is different since Saturday morning: solutions that were feasible until last Friday (e.g. bank resolutions) might not be feasible this week due to capital flight risk. Moreover, the economics profession perhaps owes some gratitude to Cypriot parliamentarians who, on Tuesday, rejected a bailout package that would impose a levy on both insured and uninsured deposits. Insured deposits are sacrosanct in developed financial markets and breach of that trust is the main error the Eurogroup committed last Friday. We offer a proposal for the resolution of the crisis in Cyprus that provides a solution minimizing the losses to the banking sector and the economy in general, under the current circumstances.

Keywords: Cyprus crisis, Cyprus bailout, insured deposits, deposit insurance

JEL Classification: E51, E52, E53, E58, F33, F34, G2, G21, G33

Suggested Citation

Clerides, Sofronis and Ellinas, Antonis A. and Karamanou, Irene and Michaelides, Alexander and Milidonis, Andreas and Nishiotis, George and Xiouros, Costas and Zenios, Stavros A., Proposal to Address the Current Crisis in Cyprus (March 23, 2013). Available at SSRN: https://ssrn.com/abstract=2238380 or http://dx.doi.org/10.2139/ssrn.2238380

Sofronis Clerides

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+35 7 2289 2450 (Phone)
+35 7 2289 2432 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Antonis A. Ellinas

University of Cyprus - Department of Social and Political Sciences

CY-1678
Cyprus

Irene Karamanou

University of Cyprus - Department of Public and Business Administration ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS
+357 2 892471 (Phone)
+357 2 892460 (Fax)

Alexander Michaelides

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Andreas Milidonis (Contact Author)

University of Cyprus - Department of Accounting and Finance ( email )

P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 22 893 626 (Phone)

HOME PAGE: http://www.ucy.ac.cy/~amilidon/

George P. Nishiotis

University of Cyprus - Department of Accounting and Finance ( email )

1 University Avenue
P.O. Box 20537
Nicosia CY-1678
Cyprus
357 22893617 (Phone)
357 22895475 (Fax)

Costas Xiouros

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Stavros A. Zenios

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 2 893605 (Phone)

HOME PAGE: http://https://www.researchgate.net/profile/Stavros_Zenios

University of Pennsylvania - Wharton Financial Institutions Center ( email )

3733 Spruce Street
Philadelphia, PA 19104-6374
United States

HOME PAGE: http://zenios.wordpress.com

Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway

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