Cyprus have highlighted the fundamental weakness in the European banking
system and the extreme fragility of fractional reserve banking. Cypriot
banks invested heavily in Greek sovereign debt, and last summer's Greek
debt restructuring resulted in losses equivalent to more than 25
percent of Cyprus' GDP. These banks then took their bad investments to
the government, demanding a bailout from an already beleaguered Cypriot
treasury. The government of Cyprus then turned to the European Union
(EU) for a bailout.
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