Is it The Right Time for Cyprus to exit Euro-Zone?

Cyprus has struck a last-minute bailout deal on Monday, which also saved the island nation from

becoming the first to be forced out of Euro-zone. Even though the tiny island in the eastern part of the

Mediterranean Sea escaped the bankruptcy, but its business model is gone and marks the start of fresh

problems.

In a first, all lenders to Laiki Bank-- Cyprus's second-largest bank-- will see their investments wiped out,

without even their consent. Investors and share trading companies with over 100,000 euros in their

account at that bank will lose majority of their money. All this because Laiki Bank itself has been phased

out.

Thousands of jobs in its banking sector- which accounted for almost 50 per cent of its GDP- will be axed.

Tax revenues are going to fall dramatically while social service spending is going to rise. It also remains

unclear whether population of just-a-million will be able to bear that burden. The bigger concern,

however, is that foreign investors and Stock Trading firm, will now leave the country taking their money

with them?

All this is sheer bad luck for Cyprus. The Republic of Cyprus, also known as Southern Cyprus which is led

by Greeks, joined the European Union in 2004 and displaying the best of “bad timing” it joined the Euro-

zone in 2008, just before the crisis happened. Since Cypriot banks were heavily exposed to Greek debt

crisis, its balance sheet took a nose dive, leading to rise in interest rates and now bankruptcy. So, this

provides a reason to be happy for those EU countries which chose to remain outside mismanaged Euro-

zone.

But, the worst is still to come. The plan involving a haircut will not only trigger a run on Cyprus’s banks

but also in other ailing countries like Spain and Italy which fear that EU can do the same with them.

There is no prize for guessing what would happen then.

Congrats Cyprus. You have been bailed out for now. However tiny you are, share trading companies,

Banks, investors and the European Union have paid heavily for it and they might keep paying for next

God knows how many years. Good, but get ready for another bailout, in some years. Most, including

investors and the Share Brokers, agree that management of your government was a disaster. So, for the

sake of your own health, it won’t be a bad idea for you to break-up with Euro-zone, since the cost of

staying with it is really high. Fundamental Data