As the EU struggles to keep Italy and Greece afloat, several other countries have been grappling with their own financial woes. In fact, the next country to require bailout is likely to be Cyprus, the Greek-Turkish island in the Eastern Mediterranean.
According to Cyrpus’s central bank governor and member of the European Central Bank’s governing council Athanasios Orphanides, the country has revealed “intense signs of recession.” Meanwhile, access to the capital market has been lost. “It’s very positive that the critical nature of this situation has been acknowledged,” Orphanides said. Added to this fact is that in general, hedge fund performance has been recorded as being either “down or flat” for the end of this year with returns in negative territory.
As the third smallest EU country, Cyprus’s economic position is rapidly spiraling downwards. As the country’s banks are exposed to more Greek sovereign debt, the island is forced to raise capital on their own. With tourism flailing and waning income for small and medium businesses, the weakening economy is forcing Cyprus further into the recession.
Moody’s dropped Cyprus’s credit rating by two ranks last month, while S&P lowered it the month before.
