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A Diary of the Euro Crisis in Cyprus: Lessons for Bank Recovery and Resolution
This book tells the story of the euro crisis in Cyprus from the inside. Written by the former Governor of the Central Bank of Cyprus, Panicos Demetriades, who was in office during this turbulent period, this book shows how the crisis unravelled through a series of key events that occurred during his tenure.
Written in chronological order, and broadly based on the author's personal diary, starting from his first day in office, this volume brings together economics, banking, regulation, governance, history, politics and international relations.
Presenting personal witness statements, including records of noteworthy telephone conversations, informal meetings and other milestones, it examines crucial questions How did Cyprus become so systemically important to the rest of the euro area? Why was Cyprus treated so differently in comparison to other peripheral countries in Europe? Why were bank depositors targeted? What role did Cyprus' links with Russia play in the design of the programme? What has been the toxic fallout from the bail-in? Are there any longer-term implications for the euro? What are the lessons for regulators around the world?
The book will appeal to readers interested in financial crises, the euro's architecture, the evolution of the European Monetary Union, and those with an interest in how Europe and the IMF dealt with crises in peripheral European countries.
Written in chronological order, and broadly based on the author's personal diary, starting from his first day in office, this volume brings together economics, banking, regulation, governance, history, politics and international relations.
Presenting personal witness statements, including records of noteworthy telephone conversations, informal meetings and other milestones, it examines crucial questions How did Cyprus become so systemically important to the rest of the euro area? Why was Cyprus treated so differently in comparison to other peripheral countries in Europe? Why were bank depositors targeted? What role did Cyprus' links with Russia play in the design of the programme? What has been the toxic fallout from the bail-in? Are there any longer-term implications for the euro? What are the lessons for regulators around the world?
The book will appeal to readers interested in financial crises, the euro's architecture, the evolution of the European Monetary Union, and those with an interest in how Europe and the IMF dealt with crises in peripheral European countries.
- GenresEconomics
233 pages, Hardcover
Published October 26, 2017
About the author
Panicos Demetriades
3 books7 followersPanicos Demetriades is Professor of Financial Economics at the University of Leicester and Fellow of the Academy of Social Sciences. He holds a PhD in Economics from the University of Cambridge and BA and MA degrees from the University of Essex.
During May 2012- April 2014, Demetriades served as Governor of the Central Bank of Cyprus and member of the ECB’s Governing Council. Within three days of his appointment, Laiki, the second largest bank on the island, requested state aid. Bank of Cyprus, the island’s largest commercial bank, followed soon afterwards. Between them the two banks had a balance sheet size of four times GDP, as a result of the influx of Russian and Ukrainian money. They were not only too big to fail but also too big to save, forcing the Cypriot government to apply for financial assistance from Europe and the IMF.
His first book “A Diary of the Euro Crisis in Cyprus” tells the true story of the crisis, starting from his first day in office. It has been described by leading economists as a “must read”, “a political and economic thriller” and “a vivid and dramatic story”. More details about the author can be found on his book website:
https://sites.google.com/site/adiaryo...
During May 2012- April 2014, Demetriades served as Governor of the Central Bank of Cyprus and member of the ECB’s Governing Council. Within three days of his appointment, Laiki, the second largest bank on the island, requested state aid. Bank of Cyprus, the island’s largest commercial bank, followed soon afterwards. Between them the two banks had a balance sheet size of four times GDP, as a result of the influx of Russian and Ukrainian money. They were not only too big to fail but also too big to save, forcing the Cypriot government to apply for financial assistance from Europe and the IMF.
His first book “A Diary of the Euro Crisis in Cyprus” tells the true story of the crisis, starting from his first day in office. It has been described by leading economists as a “must read”, “a political and economic thriller” and “a vivid and dramatic story”. More details about the author can be found on his book website:
https://sites.google.com/site/adiaryo...
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Displaying 1 - 12 of 12 reviews
August 1, 2026
Interesting and illuminating enough that I was able to use some of the details here when talking with a Cypriot who worked at Laiki during the crisis. Demetriades is, of course, defending his record here, but considering the public criticism he received during and after his tenure as central bank governor, it plays as a balancing perspective. I would have been interested to learn more about Christofias and his response to the crisis, he is portrayed somewhat unfairly here as a lefty who has a good heart but doesn't understand banking, which I am a little skeptical of. Maybe I'll have to find the diary of the traitorous central bank governor that was first appointed upon his election.
July 24, 2018
Finally the Euro crisis explained in simple terms.. An exciting read that takes you backstage and gives you a front row seat as every detail unfolds!! I especially loved the telephone conversations! It was very interesting to see the role little Cyprus played in the crisis, as I never thought of it before. Proud to have the author as a supervisor, excellent work!!
April 11, 2025
central bank independence on paper does not mean immunity from politics
August 11, 2018
Enjoyed reading it. Very detailed and well written. My favourite thing about the book was that you could feel the emotions and the struggle that the author experienced during that period, which makes you hold on to the book till the very last page. It takes you to the depth of politics and the banking sector; unfolding a lot of the moments regarding the EURO CRISIS that were unclear before. I would definitely recommend it to anyone who is considering a career in the banking sector or is new to it.
Read
October 6, 2018 THE AGONY OF THE CYPRUS COMMONS
A book review of
“Diary of the Euro crisis in Cyprus – Lessons for bank recovery and resolution”
by Robert Pouliot*
Could three tiny banks by international standards, serving less than 1 million population, suddenly become too big to fail, to save and, worse still, to regulate? And how could they have challenged to whole Eurosystem and threatened to bankrupt a whole country?
That is the fascinating story of how, for the first time in modern history, depositors, more than taxpayers, saved unwillingly their own banking system in a truly untested process called bail-in (as opposed to bail-out), despite the deep regulatory capture of their legislators. This lifesaving process, which dramatically unfolded in Cyprus between 2012 and 2014, has become the blueprint of banking crisis resolution.
Panicos Demetriades, Professor of financial economics at the University of Leicester, in the UK, who was at the forefront of this crisis when he acted as Governor of the Central Bank of Cyprus, wrote a real piece of suspense from the diary he meticulously kept all along those 23 shaking months on his home turf. And despite the economic foundation of that crisis, with roots going back to the admission of Cyprus within the European Union in 2004 and later, with its integration to the Euro, the story remains highly political. It is a real showpiece for hundreds of thousands of legislators around the world who usually tend to neglect the macro-economic stakes of such financial earthquakes in order to insure their own political survival and please their local constituents to the detriment of the common good. This is what, in other times and words, what the Nobel laureate in Economics, US Professor Elinor Ostrom, would have compared to the ‘tragedy of the commons’: when everybody shares a common resource, no one seems to be accountable, unless a delicate arbitrage can be agreed among the users, just like fishermen or cattle breeders. In this case, Governor Demetriades, together with the Troika of the IMF, the European Central Bank and the European Union, imposed the arbitrage among the richest stakeholders, simply because the State could not afford bailing out those three banks, together with its credit cooperatives.
It followed a completely different path from the paternalistic avenue adopted by Greece, once the idol of Cypriots who, since the late sixties, never stopped hurting militarily, politically or economically the island of Aphrodite. For the Greek crisis had tremendous impact on the solvency of the Cypriot banks, if only through the devalued government distressed bonds the institutions had bought in order to pay higher interest rates and attract more foreign depositors. Sure enough, the aggressive Cypriot institutions, which had overly expanded abroad since 2004, as well as a negligent government in Nicosia, were the main culprits of this extraordinary turmoil. Professor Demetriades testimony is equivalent to the piece financial journalist Kevin Muehring, now senior Managing Director at SGH Macro Advisors in Washington, used to write for the New York-based Institutional Investor under the title: “Inside the Saudi Arabian Monetary Authority” and “Inside the Bank of England”. However this time, Panicos Demetriades was the central actor of this drama. As much as it describes the unfolding of an historical event on the financial scene, the story reveals the real pain and independence stress of any central banker. “Diary of the Euro crisis in Cyprus – Lessons for bank recovery and resolution” is a ‘must read’ for anyone trying to understand what may happen in the future on the banking front. Especially now, with the shadow of Italy.
“Diary of the Euro crisis in Cyprus – Lessons for bank recovery and resolution”, by Panicos Demetriades, Palgrave, Macmillan, 2017.
*Robert Pouliot founded two rating agencies, one on bank credit in Cyprus (Capital Intelligence) in1982 and another on fiduciary risk for investment management firms in 1995, in Geneva/Hong Kong (RCP & Partners) and teaches fiduciary risk at the École des sciences de la gestion, University du Québec à Montréal (UQAM), and conducts research in doctoral studies at the École de technology supérieure (ETS), in Montreal. He also lectures at the Burgundy School of Business, affiliated to the Université de Bourgogne, in France. He heads two book collections at Thomson Reuters.
A book review of
“Diary of the Euro crisis in Cyprus – Lessons for bank recovery and resolution”
by Robert Pouliot*
Could three tiny banks by international standards, serving less than 1 million population, suddenly become too big to fail, to save and, worse still, to regulate? And how could they have challenged to whole Eurosystem and threatened to bankrupt a whole country?
That is the fascinating story of how, for the first time in modern history, depositors, more than taxpayers, saved unwillingly their own banking system in a truly untested process called bail-in (as opposed to bail-out), despite the deep regulatory capture of their legislators. This lifesaving process, which dramatically unfolded in Cyprus between 2012 and 2014, has become the blueprint of banking crisis resolution.
Panicos Demetriades, Professor of financial economics at the University of Leicester, in the UK, who was at the forefront of this crisis when he acted as Governor of the Central Bank of Cyprus, wrote a real piece of suspense from the diary he meticulously kept all along those 23 shaking months on his home turf. And despite the economic foundation of that crisis, with roots going back to the admission of Cyprus within the European Union in 2004 and later, with its integration to the Euro, the story remains highly political. It is a real showpiece for hundreds of thousands of legislators around the world who usually tend to neglect the macro-economic stakes of such financial earthquakes in order to insure their own political survival and please their local constituents to the detriment of the common good. This is what, in other times and words, what the Nobel laureate in Economics, US Professor Elinor Ostrom, would have compared to the ‘tragedy of the commons’: when everybody shares a common resource, no one seems to be accountable, unless a delicate arbitrage can be agreed among the users, just like fishermen or cattle breeders. In this case, Governor Demetriades, together with the Troika of the IMF, the European Central Bank and the European Union, imposed the arbitrage among the richest stakeholders, simply because the State could not afford bailing out those three banks, together with its credit cooperatives.
It followed a completely different path from the paternalistic avenue adopted by Greece, once the idol of Cypriots who, since the late sixties, never stopped hurting militarily, politically or economically the island of Aphrodite. For the Greek crisis had tremendous impact on the solvency of the Cypriot banks, if only through the devalued government distressed bonds the institutions had bought in order to pay higher interest rates and attract more foreign depositors. Sure enough, the aggressive Cypriot institutions, which had overly expanded abroad since 2004, as well as a negligent government in Nicosia, were the main culprits of this extraordinary turmoil. Professor Demetriades testimony is equivalent to the piece financial journalist Kevin Muehring, now senior Managing Director at SGH Macro Advisors in Washington, used to write for the New York-based Institutional Investor under the title: “Inside the Saudi Arabian Monetary Authority” and “Inside the Bank of England”. However this time, Panicos Demetriades was the central actor of this drama. As much as it describes the unfolding of an historical event on the financial scene, the story reveals the real pain and independence stress of any central banker. “Diary of the Euro crisis in Cyprus – Lessons for bank recovery and resolution” is a ‘must read’ for anyone trying to understand what may happen in the future on the banking front. Especially now, with the shadow of Italy.
“Diary of the Euro crisis in Cyprus – Lessons for bank recovery and resolution”, by Panicos Demetriades, Palgrave, Macmillan, 2017.
*Robert Pouliot founded two rating agencies, one on bank credit in Cyprus (Capital Intelligence) in1982 and another on fiduciary risk for investment management firms in 1995, in Geneva/Hong Kong (RCP & Partners) and teaches fiduciary risk at the École des sciences de la gestion, University du Québec à Montréal (UQAM), and conducts research in doctoral studies at the École de technology supérieure (ETS), in Montreal. He also lectures at the Burgundy School of Business, affiliated to the Université de Bourgogne, in France. He heads two book collections at Thomson Reuters.
April 23, 2018
I couldn't let it off my hand when I began to read it, a turbulent economic, political and cultural 'diary'. I could feel the intensified moment in each stage as if I was in that turmoil. A vivid and dramatic narrative of a true crisis, an island and those who embroiled. As a student in the relevant field, this book is both fascinating and illuminating for me.
March 25, 2018
This book reads like a thriller combining politics with the usually staid and boring world of economics and banking. But the book is anything but boring. Take a volatile president combined with reckless bankers, fickle politicians, Russian oligarchs and a corrupt media and you have all that is needed for an exciting read.
September 21, 2018
Goodreads encourages authors to review their own books so here’s my self assessment, one year since publication.
I wrote the book largely because I wanted to set the record straight on the Euro crisis in Cyprus, its real causes and its management, not least because I wanted to put an end to various fake narratives created by the real culprits.
I wanted the book to be accessible by non-economists as well as an interesting and enjoyable read, much as “The Big Short” was as a suspenseful story of the sub-prime crisis.
I had no interest in writing a dry economics book in third person (another publisher wanted this but I turned them down).
I also wanted to draw serious policy lessons from the crisis for central banks but I didn’t want that to become a deterrent for non-specialists, so I left the policy analysis for last two chapters.
In large part, I believe I have succeeded. Just before the book was published it caused a real stir in Cyprus. A pre publication article in Politis newspaper included some of the juiciest excerpts from the book and caused massive reaction and public debate. I gave numerous TV, radio and newspaper interviews to Cypriot media and all that began the process of questioning the fake narratives that had been circulating for years. Initially, the media focused on some of the more colourful details instead of the deeper lessons and I began to question whether I should have had those juicy incidents in the book (e.g. “the biggest whore in politics”). Fortunately, that didn’t last long.
I kept giving interviews to Cypriot media throughout the year and I am finally beginning to get the sense that most people over there now understand what happened much better. Timing is also a factor in this, had the same book been published two years earlier, it would probably have received a less friendly reception. People are more willing to listen once they start becoming disillusioned with a government that fed them fake news systematically for five years. The failure of the cooperative bank in 2018, which was in the hands of the government was one important example. They could fool some of the people some of the time, but they cannot fool all of the people all of the time.
Outside Cyprus there has also been a lot of interest from U.K., Italian and Dutch audiences but less interest than I would have expected from Greece, Germany or France. I suspect many Greeks want to read books in Greek but I’m disappointed by the lack of interest from the core of the Euro area. It’s as if it wasn’t a Euro crisis, or that what happens in the periphery is irrelevant to the core. This seems to be changing however, as people are beginning to understand that the Euro area is as strong as it’s weakest link. The series of money laundering incidents recently has shown that once dirty money enters the Euro area, it can go anywhere in the single market and can cause all kinds of trouble.
The world is indeed connected and that Russia’s links with Cyprus, which are highlighted in my dairy, have helped to make it even more connected. Manafort’s trial in the US being a case in point.
Another reason why Cyprus offers lessons for the rest of the Euro area is of course the erosion of central bank independence. It was naive or perhaps wishful thinking to believe that Cyprus was a special case and there was nothing to be learned from that experience. Slovenia and Latvia are prime examples that Cyprus wasn’t an isolated incident but other countries have also experienced vicious attacks on central bank independence, including Greece, Portugal and Italy.
Policy makers are also paying attention, which is very rewarding.
But perhaps the most rewarding comment I had was from my hairdresser, who is an English blonde, runs marathons, and hasn’t studied economics, politics or law. She said she found the first chapter tough (the part about central banks role as a lender of last resort) but once she grasped that everything else was an easy read, albeit suspenseful and disturbing. She then looked at me in the eyes and said, with a lot of sympathy: “they really scapegoated you there, didn’t they?”
I wrote the book largely because I wanted to set the record straight on the Euro crisis in Cyprus, its real causes and its management, not least because I wanted to put an end to various fake narratives created by the real culprits.
I wanted the book to be accessible by non-economists as well as an interesting and enjoyable read, much as “The Big Short” was as a suspenseful story of the sub-prime crisis.
I had no interest in writing a dry economics book in third person (another publisher wanted this but I turned them down).
I also wanted to draw serious policy lessons from the crisis for central banks but I didn’t want that to become a deterrent for non-specialists, so I left the policy analysis for last two chapters.
In large part, I believe I have succeeded. Just before the book was published it caused a real stir in Cyprus. A pre publication article in Politis newspaper included some of the juiciest excerpts from the book and caused massive reaction and public debate. I gave numerous TV, radio and newspaper interviews to Cypriot media and all that began the process of questioning the fake narratives that had been circulating for years. Initially, the media focused on some of the more colourful details instead of the deeper lessons and I began to question whether I should have had those juicy incidents in the book (e.g. “the biggest whore in politics”). Fortunately, that didn’t last long.
I kept giving interviews to Cypriot media throughout the year and I am finally beginning to get the sense that most people over there now understand what happened much better. Timing is also a factor in this, had the same book been published two years earlier, it would probably have received a less friendly reception. People are more willing to listen once they start becoming disillusioned with a government that fed them fake news systematically for five years. The failure of the cooperative bank in 2018, which was in the hands of the government was one important example. They could fool some of the people some of the time, but they cannot fool all of the people all of the time.
Outside Cyprus there has also been a lot of interest from U.K., Italian and Dutch audiences but less interest than I would have expected from Greece, Germany or France. I suspect many Greeks want to read books in Greek but I’m disappointed by the lack of interest from the core of the Euro area. It’s as if it wasn’t a Euro crisis, or that what happens in the periphery is irrelevant to the core. This seems to be changing however, as people are beginning to understand that the Euro area is as strong as it’s weakest link. The series of money laundering incidents recently has shown that once dirty money enters the Euro area, it can go anywhere in the single market and can cause all kinds of trouble.
The world is indeed connected and that Russia’s links with Cyprus, which are highlighted in my dairy, have helped to make it even more connected. Manafort’s trial in the US being a case in point.
Another reason why Cyprus offers lessons for the rest of the Euro area is of course the erosion of central bank independence. It was naive or perhaps wishful thinking to believe that Cyprus was a special case and there was nothing to be learned from that experience. Slovenia and Latvia are prime examples that Cyprus wasn’t an isolated incident but other countries have also experienced vicious attacks on central bank independence, including Greece, Portugal and Italy.
Policy makers are also paying attention, which is very rewarding.
But perhaps the most rewarding comment I had was from my hairdresser, who is an English blonde, runs marathons, and hasn’t studied economics, politics or law. She said she found the first chapter tough (the part about central banks role as a lender of last resort) but once she grasped that everything else was an easy read, albeit suspenseful and disturbing. She then looked at me in the eyes and said, with a lot of sympathy: “they really scapegoated you there, didn’t they?”
October 13, 2025
Diary of the euro crisis in Cyprus
The idea that a lot of the same central type of banking that occur occurs in the United States, that Timothy Geithner and Lawrence Summers would’ve been taken care of in the United States occurred in Cyprus simply fascinates me because effectively that they’re taking the playbook of the federal, reserve and studying effectively
One thing that I found particularly curious, is that basically there was a communist conspiracy or that people had a conspiracy that communist were trying to overthrow the bank of Cyprus then that kind of blew me away. I didn’t have any idea about that until I read this book and it’s interesting that during the 2012 2013 banking crisis and with that massive exposure to gree with those high interest rates and liquidity being a massive issue as well as The Troka of the European Union in the European central bank in the international monetary fund that were doing the structural programs and bailing out the government. I didn’t realize that this left-wing and what they called a communist government came into our in Cyprus and they made a lot of mistakes and spend a lot of misinformation so I guess there was a lot of conspiracy theories going out that the communist had laid out this Cypriot Banking crisis.
I also didn’t realize that there might’ve been some animosity between West German politicians who still had animosity over the communist control of east Germany and how Cyprus continues to maintain really close relations with Russia, but the banking minister indicated that was explained through the fact that Through the orthodox religion and the history of Russia, having connections with the Sorella alphabet, going back to the byzantine era with Cyprus but what’s interesting is that Cyprus was seeking alone from Russia rather than from the Troy that is to say the international monetary fund, European Union and European Central Bank.
I guess the conspiracy goes further regardless of your following communist, conspiracy theories, but the idea is that Russian oligarch’s were illegally investing money in Cyprus to save Cyprus and German taxpayers. We’re having to pay money to bail out Cyprus for these illegal investments. The minister who is the author of the banking in Cyprus says he doesn’t know that if these reports were true in Germany, but regardless, they were politically viable and they were being promoted all throughout Germany
The idea that a lot of the same central type of banking that occur occurs in the United States, that Timothy Geithner and Lawrence Summers would’ve been taken care of in the United States occurred in Cyprus simply fascinates me because effectively that they’re taking the playbook of the federal, reserve and studying effectively
One thing that I found particularly curious, is that basically there was a communist conspiracy or that people had a conspiracy that communist were trying to overthrow the bank of Cyprus then that kind of blew me away. I didn’t have any idea about that until I read this book and it’s interesting that during the 2012 2013 banking crisis and with that massive exposure to gree with those high interest rates and liquidity being a massive issue as well as The Troka of the European Union in the European central bank in the international monetary fund that were doing the structural programs and bailing out the government. I didn’t realize that this left-wing and what they called a communist government came into our in Cyprus and they made a lot of mistakes and spend a lot of misinformation so I guess there was a lot of conspiracy theories going out that the communist had laid out this Cypriot Banking crisis.
I also didn’t realize that there might’ve been some animosity between West German politicians who still had animosity over the communist control of east Germany and how Cyprus continues to maintain really close relations with Russia, but the banking minister indicated that was explained through the fact that Through the orthodox religion and the history of Russia, having connections with the Sorella alphabet, going back to the byzantine era with Cyprus but what’s interesting is that Cyprus was seeking alone from Russia rather than from the Troy that is to say the international monetary fund, European Union and European Central Bank.
I guess the conspiracy goes further regardless of your following communist, conspiracy theories, but the idea is that Russian oligarch’s were illegally investing money in Cyprus to save Cyprus and German taxpayers. We’re having to pay money to bail out Cyprus for these illegal investments. The minister who is the author of the banking in Cyprus says he doesn’t know that if these reports were true in Germany, but regardless, they were politically viable and they were being promoted all throughout Germany
June 24, 2018
Professor Demetriades gives a first hand account of the banking crises in Cyprus that led to the first bail-in in a Eurozone country. This excellent book has everything. Large banks with directors who did not have a clue about the financial condition of their bank.Russian oligarchs with their lawyers who lobbied for their interests. Conspiracy theory that EU and the world’s most prestigious firms conspired to bankrupt the Cypriot banks. People from all angles of society believing the myth that the Bank of Cyprus was impregnable. A whole nation unable to understand why in the hour of need EU had a different approach than what was extended to other nations. Professor Demetriades describes vividly his one man fight against both the establishment and the local society. The question that arises is why Cyprus, after joining the EU, adopted the euro if it was not ready to accept the one rule that matters. That is once you have euro as currency all monetary decisions are transferred to Frankfurt. In good times and in bad times.
September 3, 2022
This is a diary from the author who was central bank governor from May 2012, until his undue resignation under pressure. It is not a treatise into the crisis itself. The author was not part of the making of the crisis, nor was he part of the negotiations when the crisis erupted. He was called to implement the agreement between the government and the European Union. He tells us of his experiences dealing with Cypriot reality implementing a difficult program when everybody was blaming everybody else. The governor was a convenient scapegoat. Interesting and useful information for the period and scope covered.
March 12, 2018
Very enjoyable book to understand the interaction of banking regulation and politics. My review is available here:
http://crescendo-erm.blogspot.com/201...
http://crescendo-erm.blogspot.com/201...
Displaying 1 - 12 of 12 reviews