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A Decade Long Economic Crisis: Cyprus versus Greece
Gikas A. Hardouvelisa, and Ioannis Gkionisb
aUniversity
of Piraeus, Greece and bEurobank Ergasias, Greece
Abstract
The paper compares the recent economic crisis in Cyprus with the much larger and still on-going
crisis in Greece, traces the causes behind their differences and assesses each country’s future
economic prospects. Cyprus entered its crisis with less onerous macroeconomic imbalances, yet with
less robust financial and real estate sectors. Cyprus delayed signing its MoU with the lenders but
subsequently delivered quickly on the program requirements, front-loading the fiscal policy
restrictions. Greece reduced its fiscal deficits, yet, after its economy stabilized and began recovering in
2014, it suddenly adopted in 2015 a very naïve and backward-looking confrontational strategy with
its lenders, which brought a second recession. Today, at the end of 2016, Cyprus has managed to
keep its international comparative advantages and has the luxury to focus on its long-term growth
strategy, having lost only 5% of its pre-crisis income. Greece, after having lost over 22% percent of its
pre-crisis income, has not yet escaped its crisis, is still burdened by economic stagnation, an
unsustainable public debt and unusually high tax rates that constrain growth. The two countries
share common risks today: A very weak financial sector with unusually high no-performing loans,
and an unusually low ratio of investment to GDP.
Keywords: Cyprus, Greece, crisis-comparison, macroeconomic imbalances, banking-crisis, NPLs.

We would like to thank Theodoros Stamatiou as well as the editor of the journal and two anonymous referees
for their comments. The paper extends an earlier presentation of the first author in Nicosia, Cyprus on April 21,
2016 in a conference organized by the Cyprus International Institute of Management on the topic: “How to kickstart growth.”
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Corresponding author, Address: University of Piraeus, Department of Banking & Financial Management,
Karaoli & Demetriou 80 Piraeus, GR 18534.
Email :[email protected]