From Bail-out to Bail-in: explaining the variegated responses to the international financial aid requests of Ireland and Cyprus

The financial crisis that hit the Eurozone in 2010 drove a number of its members request assistance from their EU partners. The reaction to these requests at the European level came in coordination with the IMF, but not necessarily in a uniform manner. This article compares the adjustment programmes of Ireland and Cyprus. Despite their similarity on the independent variable (local economic conditions), the design of the Irish and Cypriot programmes (the dependent variable) differed fundamentally, not least because of the introduction of the bail-in clause in Cyprus, involving direct loses for depositors. This article seeks to explain how this key policy departure came to be and what were the conditions that made its introduction possible by examining the temporal evolution of the crisis response and focusing in particular on four explanatory themes: (i) time as a negotiating (dis)advantage; (ii) time as a platform for policy learning; (iii) time as a justifier of past policy choices (path dependency) and (iv) time as a signifier of future policy choices (path setting).