Abstract
Cyprus suffers from a developing acute case of Balance Sheet Recession. This means that because of the excessive and quite unprecedented levels of private debt (3 to 4 times the size of the country’s GDP) weighing on households and corporations, it is practically impossible for the country to overcome the recessionary effects of the austerity conditions that were imposed since the bail-in in 2013 and which still constitute the core of the Government policy. The article concludes that therefore the government should stand ready to have in place the institutions and provide for such fiscal measures which will mitigate and cushion the deflationary effects of the coming, but very foreseeable, recession.
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