Shrinking the Cypriot bailout – the eurozone is running short of tools

Amid political resistance in Germany and elsewhere to another bailout, Eurozone leaders will seek to shrink the size of the €17bn bailout by up to €7bn. However, it is estimated that even in a best case scenario, only around €4.5bn could realistically be cut, due to practical and political constraints. This will leave Cypriot debt to GDP at 130% - a level that remains wholly unsustainable. In turn, this makes further financial assistance for Cyprus likely, reminiscent of developments in Greece.

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