The Eurozone has grabbed headlines over the past few years. And lately, the downgrade and rescue of Cyprus seemed to indicate further trouble for the region.

But Cyprus is unique, says Luc de la Durantaye, vice-president of global asset allocation for CIBC Asset Management. He manages the Renaissance Optimal Inflation Opportunities Portfolio.

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First off, the country is relatively small, which means any impact it has on markets is manageable.

Second, the rescue solution provided by the ECB primarily impacted the country’s depositors.

“It was a last-ditch attempt since the shareholders at the banks were already wiped out,” says de la Durantaye. “There were also very few debt holders as well, so they [were forced] to bail in and implicate the depositors.”

Read: Cyprus not a full Eurozone member

Since Cyprus’ crisis was averted, investors have questioned how other Eurozone members will be dealt with. De la Durantaye says they’re wondering “if this will be the new blueprint for the rest of Europe if a similar situation arises in Spain or Italy.”

But “Spain and Italy are different. Before you get to the depositors, the country has large shareholders and debt holders that would be impacted.”

Read: Investors focus on Spain

Further, any risks related to the Cyprus bailout have been priced into markets since the operating costs of other European banks have already risen. “The ECB is very sensitive to increases in the costs of capital of its banking system.”

In the long term, these effects will only dampen recovery expectations for the Eurozone.

Read: Europe won’t crash global GDP

“We’d already [predicted] a sluggish recovery that would take until the end of 2013,” says de la Durantaye. Now, it will just be delayed.

Nonetheless, your clients should monitor these global events if they’re exposed to Europe. He adds the Eurozone still isn’t solid and there’s work to be done regarding fiscal integration and a banking union, but stresses there’s no significant systemic risks threatening markets.


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