Shackled and Drawn
Accountancy Cyprus, Vol. 126, March 2017
1 Pages Posted: 5 Apr 2017
Date Written: March 1, 2017
Almost four years after the bail-in of March 2013, the fundamentals of the Cyprus economy remain dire. Despite the completion of the island’s economic adjustment programme, and the seemingly good economic indicators – including a growth in GDP of above 2% in the past year – the huge private debt (private debt to GDP was over 350% in mid-2016) remains stubbornly unchanged and is affecting all attempts to rebuild the economy. Moreover, the banking system remains bloated (more than three times GDP) and rather unstable, with about half of exposures still in non-performing loans. It is argued that to put the economy on a sound footing and sustainable growth path it is necessary to create conditions of demand and through government-led initiatives, such as the introduction of an independent development and finance agency, to pave the way for both public and private sector capital investment to flow into viable projects and companies with healthy balance sheets.
Keywords: Balance Sheet Recession, Debt Deflation Spiral, Sustainable Growth, Debt Minimization
JEL Classification: D61, G17, G21, G32, G33, H43
Suggested Citation: Suggested Citation