A seized Iranian weapons cache exploded July 11 in Cyprus, shutting down a major power plant and taking half the country's electricity offline. Though the country traditionally has exercised more cautious fiscal policies than many European states, it still is burdened by a substantial current account deficit and a weak and divided government. Cyprus' budget deficit — it has climbed from 5.4 percent of gross domestic product (GDP) deficit in 2010 to 7.1 percent in 2011 — was well into the danger zone by EU standards even before the power plant incident. Now, with roughly half its electricity offline, the deficit can only climb while growth can only fall. But with Cyprus’ national debt being only 61 percent of gross domestic product, any financial receivership that Cyprus might need to enter into would be relatively short, and with an economy of only $23 billion it would not be a significant burden on the EU bailout program.
