Cyprus: from bad to worse

The situation in Cyprus is deteriorating as the outgoing government has failed to secure a bail-out from Troika. Instead, the EU officials are talking about bail-in where Cyprus bank deposit holders have to take so-called haircut. This will be the final blow to the Cyprus banking system.

As this news is in the air, panic might spread among people and companies may begin to pull money out of the Cyprus banking system.

Some of German officials are saying that Cyprus has no structural importance for Eurozone and the country could default. Some are voicing that a cap to be put on how much of help any EU bank can get from the EU.

However, ECB is firm in its position to help Cyprus and avoid any default in the Eurozone.

Cyprus needs about €17bn of which €10bn is required in order to re-capitalise Cyprus banks due to the fact they took a painful haircut on the Greek bonds. Another €7bn is required for the Cyprus government.

Everybody expects that terms and conditions are to be agreed on Cyprus bail-out or bail-in by the end of March. Cyprus is having a vital presidential election this month where a right-wind candidate is widely expected to win a post.