Introduction
The banking crisis in Cyprus resulted in economic instability in the country. This prompted for rapid measures by the government, the central bank and the European Union in general. Various policies were implemented to counter the effects of the crisis. The adopted policies were designed to restore financial stability (Weisenthal 2013).
Government policies
The government of Cyprus was swift in the introduction of policies that would save the economic situation in Cyprus and restore the confidence of investors. This is evident through the implementation of a number of policies. In the year 2012, the government of Cyprus introduced stringent measures that were focussed on reducing social expenditure in a way that the poverty situation in the country would not be worsened. The government targeted benefits such as the student grant and the universal child benefit (Hobson 2013).
Another policy that the government adopted was increasing the rate of value Added Tax (VAT) and excise duty on commodities such as property and oil affected everyone. This was a measure that was meant to help bailout financial deficits. Additionally the government also introduced amendments in social policy. Examples of these included removal of mother’s allowances, Easter allowance reduction for pensioners, grant reduction for different schemes (Neuger 2013).
The third policy measure that the government adopted is the introduction of an economic adjustment programme. The program was designed to cater for medium and the short-term financial challenges that Cyprus was faced with. The program had a number of objectives which included restoring the stability of the banking sector through approaches such as financial institutions downsizing and addres...
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... policies introduced by the government, the Central Bank of Cyprus and the EU in general saved the country from total collapse. The policies had both advantages and disadvantages but their advantages were greater than the disadvantages making their introduction worthwhile.
References
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Genay, H, & Mei, M 2013, ‘The Cyprus crisis through the lens of bank investors’, Chicago Fed Letter, Vol.1, No.315, pp1-4.
Hobson, J 2013, ‘Sheila Bair: Cyprus deposit tax unlawful, destabilizing’, Marketplace Morning Report, 19 March.
Neuger, J 2013, ‘Deauville Zombie Strikes as Cyprus Tax Inflames Crisis’, Bloomberg News, 19 March.
Weisenthal, J 2013, ‘Former Cyprus Central Banker Goes Off On The EU And Says The European Project Is Dying’, Business Insider, 19 March.
The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.
Schwartz, Pedro. "Why The Euro Failed And How It Will Survive." Cato Journal (2013): 521-534. Academic Search Complete.
.... In EU Trade Talks." Washington Times, The (DC) (2013): 1. Newspaper Source. Web. 15 Nov. 2013.
Tom Newton Dunn, ‘Go to the war on the Eurom Law’ The Sun, 7 February 2011accessed 29 March 2011 http://www.thesun.co.uk/sol/homepage/news/3395471/David-Cameron-urged-to-go-to-war-over-Euro-law.html
In 2007, the financial crisis broke out and damaged many countries’ economies across the globe. Central banks around the world took actions to react with a series of monetary policy. Many central banks like European central bank(ECB), Federal Reserve (FED) lowered their interest rate to around zero in 2009. Because of the constraint of Zero Lower Bound(ZLB), the conventional monetary policy(CMP) is no longer efficient. Therefore, the conventional monetary policy instrument that focus on a short run interest rate converting into concentrate on the adjustment of central’s balance sheet, which is the unconventional monetary policy(UMP). ECB and FED have implemented unconventional policy such as purchasing the government debts and lowering the requirement of loan collateral.
?Loosening Up? Is there still a chance for settlement in Cyprus??The Economist 17-23 May 2003.
Sheetz, M. S. (2012, February 6). Why It Won’t Be a Tragedy if Greece Defaults. The Washington Post: Foreignpolicy.com. Retrieved February 1, 2014 http://www.foreignpolicy.com/articles/2012/02/06/why_it_won_t_be_a_tragedy_if_greece_defaults
In response to the crisis, the government enacted strict austerity measures that consisted of tax hikes and draconian cuts to public expenditures, especially spending on health and education. While the tax base has contracted since the crisis, we have seen government revenue increase from its low point in 2009 because of the 2010 tax code reform that increased the value added tax (V.A.T.) from 16% to 18% and income tax 19% & 21%. The cut to education and healthcare of €10bn a year by our government have been met with much hostility by the Spanish public, although the cut may prevent the necessity for a financial bailout as we attempt to meet European Union deficit targets. The public debt to GDP ratio has reached above 90%, an infamous threshold that, once passed, our country is sure to see a contraction in our annual GDP growth by as much as one percent. In 2012, we saw a sharp decrease in the investment in public infrastructure. However, as our economy is picking up, we have reinstated some of the funds necessary to keep our infrastructure functioning
Encouragingly Jordan’s banking sector managed to weather the crisis better than other sector of the economy, and other banking sector in different countries. This was mainly supported by rather conservative policies and tight regulations. For instance banks in this country are pure universal. This implies there is no pure investment bank that relies entirely on investment income, a factor that majo...
Economides, Spyros. "Viewpoint: The Politics of Greece's Financial Crisis." BBC News. BBC, 17 June 2011. Web.
Lower taxes can be used to stimulate demand for goods and services by increasing disposable income thereby bringing about changes that can increase income, output and employment. In a micro economic context, taxes can be used to regulate consumption of certain goods in the economy. If government wishes to discourage the consumption of say cigarettes, it can raise the tax on cigarette and vice versa. In addition, the government can encourage the production of certain goods in the economy by lowering taxes on them, while it may raise taxes if she wants to discourage their production. Arguments have also been made to justify the imposition of taxes on income distribution grounds. By levying in a progressive manner, the gap between the rich and the poor is bridged
Turkey’s economy has weathered some spectacular pratfalls in the past, with a major economic crisis in 2001 almost bringing the country to its knees. What’s different in 2004 from the previous "recoveries" is how committed Turkey is to establishing firm economic footing once and for all. The government is swallowing the International Monetary Fund’s painful economic medicine, making tough choices for fiscal discipline.
Gregor Meerganz von Medeazza, Economic and Political Weekly, Vol. 41, No. 11, Money, Banking and Finance (Mar. 18-24, 2006), pp. 949-952
Towards the end of the 1990’s, the Irish economy was booming, unemployment rate fell to around 4% and productivity was continuingly to grow. However, from 2002 onwards, the nature of the boom started to alternate. Labour output was no longer increasing, inflation was excessive and progression in gross domestic product (GDP) increasingly became related to the housing market. By 2006, although the public finances still seemed strong, this was misleading; the Irish economy was heavily dependent on the housing boom. The covered banks accounted for over 65% of the overall growth in property- related lending in Ireland (including 100% mortgages and tracker mortgages) and over lending to developers in Ireland, further highlighting the bankers’ greed.
Steverman,B. and Bogoslaw, D. (2008) ‘The financial crisis blame game’, Business week, October [Online]. Available at: http://www.businessweek.com/investor/content/oct2008/pi20081017_950382.htm?chan=top+news_top+news+index+-+temp_top+story (Accessed: 1st August 2010).