I don't understand the statements being made that Cyprus (and before it, Greece) would be "forced" to leave the Eurozone if it defaults on its debt?

Would it be "forced" by the other Eurozone countries or would be "forced" as a practical matter so it could have some currency? Something else?

  • 1
    "Forced" as a practical matter is the more likely interpretation, but if you don't provide us with a direct quote, all we can do is speculate.
    – yannis
    Commented Mar 22, 2013 at 17:52
  • 2
    It would be forced to leave as a practical matter: They wouldn't be allowed to print/issue any more €s. So they would have to use another currency. Commented Mar 22, 2013 at 22:54
  • I think it is because if they do not force them out making them none Eurozone members then the other members of the Eurozone will be required to cover their debts. To me it is like cosigning but then erasing your name from the line when the actual debtor is about to default. Commented Mar 26, 2013 at 18:07
  • Martin I like your answer but I cannot choose a comment as the answer.
    – noctonura
    Commented Apr 6, 2013 at 4:30
  • @MartinSchröder can you post references? If so, I suggest adding them as part of an Answer below, so Rich can accept it. :)
    – Lizz
    Commented Apr 14, 2013 at 5:23

1 Answer 1


It is a practical matter (mostly). The Eurozone uses the same exchange rate and currency but doesn't use a standardized interest rate among members. When the standard currency went into effect, each member signed an agreement to keep their debt levels and interest rates at a low level to ensure the integrity of the economic union. Germany and France broke the agreement several times. Cyprus could be forced out of the Eurozone by force for breaking the agreement, but since France and Germany can't follow it either, it's unlikely to be invoked.

The varied levels of interest rates have caused jobs to move to nations with lower interest rates, namely Germany, since it also has strong manufacturing. The debt levels of Cyprus only gets worse in this situation.

Usually when a nation is in high debt, it is able to inflate away much of its debt. Cyprus can't do this because it has an artificially strong currency, the Euro. A nation in as much economic distress as Cyprus should have a very weak currency. Weak currencies promote exports and reduce debts.

Reference: Causes of Eurozone crisis

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