Cyprus deal will hit the euro

The strings attached to Cyprus's bail-out has undermined confidence in the single currency.

The deal to bail out Cyprus has "weakened the eurozone as a whole", says The Economist. Cyprus looks condemned to a long depression. The collapse of its oversized banking sector, which had reached 700% of the island's GDP, means the economy could shrink by as much as a fifth. As a result, debt as a proportion of GDP will continue to soar.

So Cyprus will need another rescue. And for now its woes are likely to exacerbate a key threat to the euro's survival: "rising resentment of creditor countries in a stagnant periphery".

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