Well, that didn’t last long. It emerged last week from leaked European Commission documents that Cyprus is in even bigger trouble than everyone thought. It had been set to raise €6bn to unlock another €10bn of European bail-out money. But it now looks as though the overall size of the rescue package will be €23bn rather than €17bn.
And with Europe unwilling to stump up more cash, Cyprus will have to come up with the extra €6bn. It will require bank depositors and bondholders to pay more than originally foreseen.
The main reason for the jump in the figure is revised forecasts by the European authorities, which imply higher debt and hence a need for more bail-out money. At first the economy was expected to shrink by 3.5% and 1.3% in 2013 and 2014. Now these figures have jumped to 8.7% and 3.9%. And they still look optimistic, says Richard Barley in The Wall Street Journal.
The oversized banking sector is set for a massive blow. The downturn could also set off a vicious circle as corporate and household bankruptcies cause further bank losses. Nomura, a financial services group, reckons GDP will shrink by at least a fifth in two years.
All this jeopardises the projection that debt will peak at 126% of GDP in 2015 and raises the prospect of Cyprus needing yet more help.
Meanwhile, Ireland and Portugal have been given a seven-year extension on the average maturity of their bail-out loans, and markets are worrying that Slovenia, which also has an oversized, damaged banking sector, will need help. The crisis continues.