Tuesday, March 26, 2013

In Greece, Cypriot Kin's Woes Seem All Too Familiar

Wall Street Journal
March 26, 2013

As the crisis in Cyprus enters its second week, Greeks have been riveted by events on the island, with the banking crisis dominating the media, the blogosphere and cafe chatter on the streets of the Greek capital.

But despite the deep economic, cultural and historical links between Greeks and Cypriots, few expect the problems on the island to rebound back on the Greek economy, which is already struggling with a sixth consecutive year of recession.

The reason: Cypriot's small size, less than a 10th that of Greece.

"I don't think the Greek economy will be particularly affected," said Aristides Hatzis, an associate professor of law, economic and legal theory at the University of Athens. "Greece will probably get a slight cold from all this."

The closure of Cyprus's two main banks aren't expected to weigh heavily on the Greek economy, and Greek bankers say they have seen no run on deposits at local banks. Some speculate that the crisis in Cyprus—where many Greeks sent their money in recent years to escape the crisis in Greece—may actually benefit Greek banks, which stand to get a liquidity boost as nervous savers from Cyprus look for "a new home" for their money.

"Given the relationship between the two countries, the ordinary man on the street may choose to open an account in Greece," one senior banker said.


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