Cyprus illustrates the broader collapse of the neoliberal political order through systemic institutional decay and financialized corruption. Following the 2013 Eurogroup bail-in, Cyprus underwent significant asset stripping, epitomized by the 2018 collapse of the Cyprus Cooperative Bank, where billions in assets were transferred to Hellenic Bank for a nominal amount while taxpayers absorbed substantial guarantees and bad debts. The now-defunct Cyprus investment programme further commodified sovereignty, producing over €10 billion mainly for luxury developers before its collapse in 2020 amid corruption investigations.

In the energy sector, regulatory decisions favored private producers, pushing state consumers to bear heavy costs including over €1.2 billion in EU carbon penalties while private entities profited. The protracted mismanagement of the Vassilikos LNG terminal project, abandoned by its consortium in 2024, leaves Cyprus dependent on costly fuel oil and vulnerable to future energy deficits. Combined with ongoing current account deficits and pressure to sell domestic assets to foreign investors, these factors underscore a political economy characterized by state incapacity, extraction, and declining sovereignty.

This case reflects the neoliberal order’s broader lifecycle of institutional erosion and systemic corruption as public power is subordinated to private interests. Experts argue that recovering economic resilience and democratic legitimacy in Cyprus and similar Western democracies will require transparent, capable state governance that rejects passive deregulation and the commodification of sovereignty.