Over the past five years, one country after another in the European Union has been hit by a financial crisis. First was Greece, then Ireland, Portugal, Spain, and finally Cyprus. Each crisis was often colored by a stereotype, such as “The Greeks are always [fill in the blank].” Yet even as the EU still struggles with Greece and its threat to the eurozone, the Greek-speaking country of Cyprus has worked against such typecasting.
Last Friday, international creditors highly praised Cyprus for its reforms since a 2013 banking crisis, releasing a further $314 million in rescue funds. While Cyprus’s economy is small within the EU, its progress now looms large as a model for Greece, its larger sibling.
Difficult reforms have produced unexpected progress for a country of less than one million people on a tiny Mediterranean island. The economy did not contract as much as predicted in 2014 and even showed growth so far this year. Government spending is under control, exceeding the average within the EU. Unemployment has dropped. And foreign investors are back.
The reforms were done with wide popular support and under the watchful eye of the International Monetary Fund and EU institutions. The Cypriot government has revamped the country’s banks. It has put procedures in place for home foreclosures and bankruptcies. It set up a new welfare system. And it set a schedule to repay its high debts.
“The Cypriot economy and society in general have exhibited considerable flexibility and endurance, keeping the country resilient even after the recent dramatic developments,” says Chrystalla Georghadji, Governor of the Central Bank of Cyprus. President Nicos Anastasiades says the painful reforms were needed to “unlock” the potential of the people.
Other crisis-hit countries in the EU that have made difficult reforms should by now have inspired Greece to follow suit. Perhaps Greece’s sibling country on a nearby island will now set the example.
Once further reforms are implemented, says President Anastasiades, Cyprus will be stronger and wiser as a result of the crisis. Better to be a model than a stereotype.