A potential exit of Cyprus from the euro zone would entail both political and economic dangers for the country, Government Spokesman Christos Stylianides has warned.

The warning, included in a written statement issued on Monday, came on the eve of a House debate on a memorandum of understanding the government has concluded with its international lenders and amid calls from some political parties to exit the euro zone.

The Spokesman pointed out that for small economies which are non – export oriented any kind of currency devaluation would not offer any advantages which it might have offered under different circumstances.

This is the reason that the Republic of Cyprus never devalued the Cyprus pound apart from a specific time during the 70s when the currency was connected to the British pound and the devaluation was imposed by necessity, the Cypriot Spokesman explained.

Exiting the euro area, under the current circumstances, and the adoption of an obviously weaker currency would create greater problems in the financial sector, he noted.

Inevitably, he continued, this would lead to uncontrollable capital outflows at a moment when the banking sector’s stabilization is a key objective.

A devaluation of a new currency would be followed by an immediate fall in the purchase power of citizens’ income, he said, adding that the expected skyrocketing of inflation would further erode the standard of living. At the same time, he warned, the devaluation of the new currency would mean a corresponding reduction in the market value of the total of deposits, including insured deposits.

Import costs, Stylianides noted, would soar which could result in the lack of essential goods.

He further stressed that an exit of Cyprus from the euro zone would create political and legal risks of an exit from the EU itself.

On Μarch 25 Eurozone Finance Ministers, known as the Eurogroup, decided on a €10 billion bailout for Cyprus coupled by a bail-in by uninsured depositors. The decision provided that Cyprus` second largest lender, the Cyprus Popular Bank, will be wound down, whereas Bank of Cyprus` uninsured deposits will take losses up to 60%.