MADRID – Once again, Europe has peered into the abyss. But the tentative agreement between Cyprus and the troika (the European Commission, the International Monetary Fund, and the European Central Bank) probably means that the worst has been avoided. Big losses for large depositors in Cypriot banks will now be imposed, and the country’s second-largest bank will be shuttered. Looking ahead, however, Cyprus has the means not only to recover, but even to heal its longstanding division with the Turkish-backed statelet in the north of the island.
Cyprus, of course, is just the latest country to be hit by the economic crisis surging through the Mediterranean. For years, Cyprus had an immense banking bubble, with the sector’s assets estimated at roughly seven times the country’s GDP, as foreign money poured into a tax haven within the eurozone’s secure environment.