THE Republic of Cyprus became a member of the European Union in 2004 and joined the Eurozone, the group of countries that have the Euro as their currency, in January 2008.
During this period the economy of the country grew faster than that of other European countries; credit expanded rapidly and the banking industry became very large relative to the size of the economy.
In the video Delia Velculescu, IMF Mission Chief for Cyprus says: “If you looked at Cyprus in the period between Eurozone entry or even before, to the run-up to the crisis around 2008, what you saw was Cyprus growing at a very brisk pace of about 4% per year, which was much better than many other countries in Europe; so everything seemed well.
“However, under this seemingly good performance there were very large economic imbalances building up.”
Following the onset of the global crisis and then the European periphery crisis, growth slowed down and the Cyprus economy entered into a prolonged recession in 2012.
Ms Velculescu adds: “What happened in Cyprus at the time was a slowdown in growth, the property market turned around and prices were declining rather than increasing, banks started lending less.
“The culmination of all of this was a loss of market confidence in Cyprus itself and the Government essentially lost market access – it meant that it could not borrow any more to finance its spending and its obligations.
The nine and a half minute HD video below includes comments and expectations from ordinary citizens who have been hit by the crisis.
[youtube=https://www.youtube.com/watch?v=A8ca7sQAlzw&w=470&rel=0;&showinfo=0]
The original video may be viewed on the IMF website.
Further reading
The Economic Adjustment Programme for Cyprus Third Review – Winter 2014