Louise Cooper

A generation of Cypriots are about to be badly hurt. It’s all unravelling – badly.

This picture is from a website for Cypriot homes:  you can buy a three bedroom apartment for £1.6mn.  Whoever owns that — property developer or individual and whichever bank lent them the money to develop or buy it — now risks being wiped out. And this is just the beginning. Here are a few thoughts on this situation.

1. The downfall. Cyprus was a problem amplified by political incompetence, a disaster that never should have happened.  The outlook is exceeding bleak for this small economy and the economic pain coming to the 800,000 inhabitants will be severe.  Why? Because the banking industry got so giant – at seven times the economy – and it is about to shrink rapidly.  If you take 20 per cent off your depositors (a guess at the moment), then as soon as they can, they will take their money elsewhere. The Cypriot banking crisis has only just begun.

Comments

Join the debate for just $5 for 3 months

Be part of the conversation with other Spectator readers by getting your first three months for $5.

Already a subscriber? Log in