ECONOMY

Cyprus debacle could cost two years’ GDP by 2020

An economic crisis which forced the brutal downsizing of Cyprus’s inflated banking sector could cost the island more than double its GDP by 2020, banking experts said on Thursday.

Excessive risk-taking by banks and an inability of authorities to deal with the crisis brought Cyprus to the brink of financial ruin in March, and it became the first eurozone country to impose capital controls to prevent a deposit flight.

Now those same restrictions on accessing cash are stifling domestic growth, adding to the hardship of an economy expected to contract more than 6 percent this year.

Cyprus should consider lifting capital controls, issue a state guarantee of all deposits and then get a commitment from the EU that it would provide the necessary capital support, if needed, the international panel of experts said.

[Reuters]