Those who have visited Cyprus for business, or vacationed on this divided Mediterranean island’s superb beaches will be aware that its bubble inflated banking sector had, for a longtime, lost touch with reality.

Whilst this country of 800,000 inhabitants had a financial sector weighing up to ¤128 billion (US$166.55 billion), it only had a GDP of ¤17 billion. Cypriots banks were living in a fantasy world, betting on an “unbreakable” eurozone safety net, which the Greek debt crisis has blown to pieces.

Addicted to the island’s lax banking laws, low tax rates, questionable rule-of-law and high return promises, billions flew in since Cyprus entered the EU in 2004, from Russia, the former-Yugoslavia, Greece, the Middle East (Nicosia, don’t forget, stands closer to Damascus than Athens) and even Turkey, whose government is closing its eyes to Turkish controlled Northe...