GREECE AND CYPRUS AMIDST DEBT CRISIS: A COMPARATIVE STUDY

This article examines the reasons of economic difficulties Greece and Cyprus had in the beginning of this decade. The conducted analysis showed us that after the financial crisis which both countries experienced, the trajectories of their economic development are characterized by remarkable differences. Despite the fact that in the present moment both countries have finished their bailout programmes, the economic conditions in Greece are much more difficult: comparing with 2008 an average Greek has lost (sic)3413 of its annual income, while in the same time period the incomes of an average Cypriot actually grew by (sic)365. It is shown that the reasons of it are rooted in the initial economic situation before the crisis. Cyprus is a small open economy with a quite flexible labour market, which gives this country a certain resistance to the external shocks. In spite of all difficulties the island nation managed to preserve its international competitive advantages. On the other hand, Greek economy had much more serious macroeconomic imbalances. Moreover, before the crisis Greece didn't even try to fix them and pursued a pro-cyclical fiscal policy instead: despite the GDP growth, its level of public debt continued to increase. Meanwhile, Cyprus demonstrated the opposite: its level of public debt is tending to increase only with the fall of GDP, decreasing with its growth. The analysis showed that the policy of cooperating with international lenders is restoring the investors' trust, while confrontation with them only makes matters worse. In Greece, such a naive and short-sighted strategy of confrontation, adopted by SYRIZA ("Coalition of the Radical Left") and "Independent Greeks" since arriving in power, brought Greek economy back into recession, literally putting it on the edge of the abyss. Measures to ensure financial stability, implemented in the wake of crisis, manifested themselves in the set of policies intended to improve the state of public finances, mainly reducing a budget deficit, the level of public debt and long-term government bond interest rates.