[klapinat0r]

For a country whose sole gdp generator is the banking sector, with that amount of foreign holdings it would be fatal. I'd only imagine how their relationship with Russia would be if Cyprus null'ed their holdings.

I may be exaggerating, but think of it as Switzerland losing it's bank sector. How would you begin to build up a new economy which, as of yet, biggest sector is banking, for instance. Think of the large population that would be instantly out of work.

At least, that's my guess at why an insolvency wouldn't be the best option for Cyprus.

[DeepDuh]

Not that I don't agree that Switzerland loosing its finance industry would be a big blow for the country, but let's get some perspective: Banking is less than half the size of Switzerland's manufacturing industry in terms of income - in terms of workforce it's more like a third to a quarter. In international comparison, Switzerland's service industry isn't excessively large. I'd argue the country's economy would somehow survive it.

Source: http://en.wikipedia.org/wiki/Economy_of_Switzerland#Internat...