The resolution of the Cyprus crisis has a number of lessons and a number of implications. Some commentators are criticising the final set of decisions taken by the Eurozone finance ministers, following the recommendations of the ‘troika’ (the IMF, the European Commission, and the ECB), as representing a challenge to the markets in terms of creditor responsibility. It is also suggested that by substantially damaging the major industry of Cyprus, offshore banking, it leaves Cyprus facing massive economic problems. Finally, many are suggesting that the resolution of the crisis was done over the heads of the Cypriot government and people to save the Euro.

The initial set of proposals allowed the Cypriot government and parliament to consider, and reject, the proposals. The problem was that this exercise of democracy left the essential problem – the impending bankruptcy of the Cyprus economy – unresolved. Ironically the sticking point for the Cypriot parliament – applying the levy to all depositors in all Cypriot banks – was not insisted on by the Eurozone ministers or the troika; it was the proposal of the Cyprus government. This rejection ensured that any further resolution proposals, involving necessarily the Cypriot government, would be such as to avoid the Cypriot parliament rejecting it.

One other point is clear, the rescue package was not about saving the Euro, as UKIP suggest. The Eurozone ministers appear to have been willing, though not wanting, to allow Cyprus to leave the Euro. If this had been the view of the Cyprus government, confirmed by the Cypriot parliament and people, then it would have been allowed. The view was apparently taken that any collateral damage to other Eurozone economies was containable.