Cyprus has been squeezed in the corridors of power

Sir, Your editorial “Europe gets real – not before time” (March 26), which suggests that Cyprus got the best deal it could have expected, sits oddly with its acknowledgment that, like the Greek economy before it, Cyprus’s economy could contract by 25 percent over the next few years. Were anything like that to occur, Cyprus would have the greatest of difficulties in complying with the strictures of its IMF-EU bailout package, which is premised on a gross domestic product contraction of “only” about 3.5 percent in 2013.

With such bleak prospects ahead, one might ask whether Cyprus would not have been better advised to exit the euro as a means to limit the decline in its economy. For by exiting the euro, Cyprus would have been able to use a cheaper currency to promote its tourist sector as an offset to its fiscal adjustment as well as to effect the necessary adjustment of its economy away from an excessive reliance on its financial sector.

What might have been a good deal to get Angela Merkel through her September 2013 election would not appear to have been a good deal for Cyprus. It is also not clear that it will have served to keep a collapsing Cyprus in the euro over the longer haul. This would particularly appear to be the case since 67 percent of the Cypriot electorate already has doubts about the advantages of staying in the euro.

Desmond Lachman, American Enterprise Institute, Washington, DC, US

 

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Desmond
Lachman

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

Event Registration is Closed
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.