Euro Debacle
Cyprus – and possibly the single currency – is approaching a watershed moment. The eurozone has been
putting out fires all over southern Europe for the past 40 months. The rescue packages have passed
and economies including Spain, Italy and Greece have been kept alive. The austerity-minded countries
such as Germany, Finland and Holland have kept their southern euro-partners at bay by pushing tough
bailout conditions, but it seems that Cyprus is different and many experts speculate that the small island
state will become the first country forced out of the euro.
It’s clear that eurozone decision makers calculated that Cyprus is small enough to fail whereas the
collapse Italy or Spain would have likely brought down the eurozone. To understand what is going on
in Europe one needs to evaluate several variables. For instance, Germany is preparing for elections and
chancellor Merkel is trying to win votes by forcing Cyprus to agree to the tax levy or else say goodbye to
the eurozone.
Moreover, the euro has not seen a massive drop due to the miniscule size of the Cypriot economy,
which makes only about 1/3 of one per cent of the eurozone’s economy as a whole. Today’s
negotiations between the parties will determine the future of the small island state, known for delicious
souvlaki, foreign companies and sunny beaches. Regardless of today’s outcome, sunny beaches and
souvlaki will remain even if the souvalki will taste a tad bit bitterer than before.