Little Cyprus Sparks Contagion Fears – 22 March 2013
The situation in Cyprus is still very fluid and very serious—perhaps more so than in Greece last year.
While the country may be too small to have a meaningful direct impact on the rest of the euro area, the big issue for markets is the potential for contagion to more systemically important countries.
Cyprus is a small economy, with nominal GDP last year of just €18 billion (US$23 billion) or 0.2% of the euro-area total. So while Cyprus’s bailout may seem small in euro terms, it is huge relative to the size of its economy.
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