This article published this morning by Bloomberg News tells how the IMF is contributing 1 billion euros to rescue Cyprus. Of course, as always with the IMF, the money comes with oversight. The IMF is calling Cyprus to restructure its two largest banks, reduce their deficit, and change their wage and pension system.
As we know in the United States, reducing the deficit and restructuring the large banking system is easier said than done. Do you think Cyprus will be able to meet the demands of the IMF adequately? What do you think about the IMF's decision? Should financial disasters like this be bailed out or should investors be asked to simply accept their losses? Also since Cyprus was at one point a financial center, 1 billion euros isn't going to solve the problem. Should the IMF give more in efforts to rescue Cyprus?
Also check out the video on the left of the page for UniCredit's Erik Nielsen's opinion on the IMF's decision to help Cyprus.
I am happy that Cyprus isn't just left to fend for themselves in this time of need, but they are really going to have to work to meet the demands of the IMF. It's going to be a long and treacherous process, I just hope they can handle the ride.
ReplyDeleteAnd that whatever happens there does not spark off any problems in the United States and the rest of the world.
ReplyDeleteIn today's global economy does anyone think that it is even possible for the events in Cyprus to not affect the United States or other parts of the world? I feel like everything is so interconnected that one crisis will eventually cause at least a little turbulence somewhere else.
ReplyDeleteAlex, I agree. I think that eventually the effects of Cyprus's failure will be felt in the United States and other parts of the world in some way or another. In my opinion, the changes the IMF is demanding might be a little extreme. Cyprus must have been doing something right to become such a large player among the world banks, and forcing them to change their practices might do more harm than good.
ReplyDeleteWhat cyprus did right also turned into one of its downfalls. Cyprus invested in what they thought was a safe investment at the time, Greek government bonds.. once greece got bailed out Cyprus lost a lot of its money, but still had to give their depositors the interest rates they originally offered, which was way too high. So in other words, Cyprus shouldnt have offered such high interest rates and maybe should have diversified their investments
DeleteIt's good that the IMF is helping out Cyprus with their devastating situation, but one has to remember that the IMF usually provides aid with plenty of restrictions where most of the countries they help are packing back the IMF for an extended period of time. But I'm very surprised the euro did nothing to help in Cyprus, and this really does cause some tension between European countries.
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