Differences between the sovereign debt crisis in Greece and Cyprus : some implications for Malta

Abstract

This study sets out to compare the sovereign debt crisis of both Greece and Cyprus; an analysis of the causes and consequences and their respective policy responses. Furthermore, it analyses the implications that the Cypriot Sovereign Debt Crisis had on Malta. The dissertation begins by analysing the reasons leading to the Sovereign Debt Crisis in both Greece and Cyprus. This is then followed by each countries response to resolve the crisis. The implications of the measures taken are then discussed; since they include both pros and cons. This study also examines the Cypriot sovereign debt crisis and its implications for Malta. The similarities made between Malta and Cyprus is mentioned and the more fundamental differences between the banking system in Malta and Cyprus are pointed out. Lessons for Malta from the Greek Sovereign Debt Crisis are also discussed. To conclude; the study examines the choice between bailouts or bail-ins as the best solution to the resolution of a sovereign debt crisis. The way forward is discussed, which includes the establishment of a Single Supervisory Mechanism and Single Resolution Mechanism which will lead to a greater banking union. The objective of the study is to contribute to the literature, through the comparisons made between the Greek and Cypriot Sovereign Debt Crisis, the analysis of the lessons for Malta from the Greek Sovereign Debt Crisis and the implications the iv Cypriot Sovereign Debt Crisis had on Malta. The emphasis being that, the fundamental differences between the Maltese and Cypriot banking systems are far greater than the similarities. Throughout this study many resources have been used in order to obtain the most relevant and up to date information. Thus, permitting the reader to achieve an in depth analysis on the topic. The conclusions reached are that a greater banking union is the way forward and bailouts will probably only be provided alongside bail-ins in the future.