| Summary: | M.A.ECONOMICS Over the last four decades, the economies of small states have been at the centre of discussions in the context of their high degree of economic vulnerability when compared to larger countries. Lately the issue of economic resilience has also been debated. During the past months the consequences of the biggest financial crisis since the Great Depression has drawn the attention of many analysts to the vulnerability and resilience of countries in general. Hence, the research objective of this dissertation is to specifically identify the effects of the 2007-2009 financial crisis and the ensuing recession, on the economic resilience of European small states. The resilience of these small states is compared with that of other larger European countries, thus inferring whether any significant differences between small and large states exist, while highlighting the factors that contribute to any variation in resilience. Results show that irrespective of the very high level of resilience recorded in previous years, Iceland has been solidly hit by the crisis This is attributable mainly to its banking sector's high exposure to 'toxic assets', its dependence on the interbank lending market, as well as its reliance on a small fragile currency like the lcelandic krona. The importance far small states of a stable currency such as the euro is further confirmed by monitoring both micro and macroeconomic developments in Cyprus, Luxembourg and Malta. lndeed, to date, these countries have managed to contain the recession relatively well, recording minimal changes in their resilience index. The study argues that, although it is apparent that small states' isolation from any economic and monetary union is undesirable, it does not mean that European Union and euro area memberships are safe havens and therefore structural reforms in the national countries are required ta continue building economic resilience, which is vital in the aftermath of the crisis. N/A
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