The Political Economy Aspects of the Cyprus Bail-in Plan: Challenges for EU Financial Crisis Management

Abstract

The paper examines the political economy aspects of the bail-in plan during the Cyprus economic crisis and its implications for the EU financial crisis management framework. The analysis explores the interplay between macroeconomic conditions and political dynamics, focusing on the bail-in plan’s implementation as part of the Economic Adjustment Programme of the years 2013–2016. Methodologically, the analysis draws on a political economy framework, combining insights from both orthodox and heterodox perspectives. The research findings show that the bail-in plan embodies a neoclassical rationale, emphasising individual responsibility and moral hazard concerns. In terms of applied policy, the Cyprus bail-in plan marks a paradigm shift in crisis resolution strategies, challenging conventional EU bailout policies.