What’s the deal with Cyprus?
Anyone who has opened the financial section of any newspaper recently has seen some headlines announcing doom in a European nation that many people have never even heard of. But what does the economic trouble in the small island nation Cyprus have to do with you and your retirement?
In a nutshell, the economic struggles and possible collapse of Cyprus could mean potential turmoil for anyone who has their retirement nest egg invested on the stock market. The events unfolding in Cyprus are being closely watched because a dip in this nation’s economy could very likely result in an economic contagion that spreads around the world. The economic toxin could spread, starting with Cyprus’ fellow nations in the Eurozone before making its way across world markets, and eventually taking money out of your retirement savings as your stock investments begin to drop.
In a more detailed look at the theory of economic contagion, analysts fear that if Cyprus does not find a way to escape the bankruptcy it has been facing for the past few weeks, it will be forced to exit the Eurozone, which is made up of the 17 nations sharing the euro. If that should happen, the 16 remaining nations could sink into recession as the euro loses value and their economic structure is thrown off balance. In theory, the domino effect would then continue onto all national economies that rely on trade with any of the struggling European nations.
There is some good news, however; Cyprus has made some progress in its efforts to avoid bankruptcy this week. The bad news is, we still have a long way to go before market analysts can take a break from fearing the troubles in Europe.
Right now the fear to your retirement account coming from the struggles in Cyprus is mostly speculation as we wait to see how events play out. However, the citizens of Cyprus are feeling immediate dismay, as the country’s banks have been closed since March 16th to prevent account holders from making a run on the banks the way Americans did during the stock market crash of 1929. A run on the banks of Cyprus would almost certainly add to the crisis.
The national bank of Cyprus has announced that banks will reopen on Thursday, barring any further delays. On Thursday, the reaction of account holders in Cyprus will be very telling, possibly indicating just how tough times will be going forward for the struggling European nation.
Be sure to read the follow up report on Friday, which will be published by Retirement Media Inc. at First SeniorFinancialGroup.com