Cyprus Grim Future

The future of Cyprus is uncertain, and most probably would be filled with depression,

The island have been living way way above it’s standards for years, by joining the EU and the financial help that comes with it, and by being a haven for Russian oligarch money and being a money laundering center, the island have experienced growth and a high quality of living.

But the time for a reality check came, the banking system and the schemes collapsed and the naked truth was out in the open, Cyprus Production and services are negligible, the country GDP of $24 billion is mainly due to it’s banking/services sector.

With the latest crisis, and Money fleeing Cyprus, it would not be an exaggeration to predict the GDP sliced by half.

Cyprus plans to impose capital control that means you can not move your money out of Cyprus, Restricting capital transfers – movements of money or securities – to other countries but not payments out of Cyprus. But Cyprus currency is Euro … so will it be feasible? is Cyprus exiting the Euro as-well?

“What you’ve got is a monetary and banking system which is not supposed to impose capital controls. What they are doing is creating a sub-set of rules to create a new economic area, which is unprecedented,” said David Brown at New View Economics.

One could be to buy goods in another eurozone country, shifting funds out of the island to pay for them.

To counter it, the Cypriot government could introduce limits on such payments >  that will impede business and slow turnover.

“The longer this lasts the more it will hurt the economy, the more likely it is that businesses run out of liquidity and have to default. Then we really get into trouble,” said Berenberg bank economist Christian Schulz.

So basically not only the skeleton of the Cypriot economy crumbled,  but it seams the Cypriot politicians will put the mercy bullet in the head of Cyprus economy, killing the businesses and destabilizing the currency.

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