Living within our means: lessons from Cyprus

There is an old saying that it only takes one shot to start a war.

While technically correct, this ignores the build-up - a failure of diplomacy, increasing tensions, months or years of military escalation and a collapse of trust in the opposing government or military force - that ultimately leads to that first shot.

There is a parallel with the European sovereign debt crisis where one event in recent days could turn out to be the tipping point.

The debt crisis has taken years to develop as governments in Greece, Italy, Spain, Ireland and Portugal, among others, have steadily accumulated ever increasing levels of debt.

By consistently spending more than they derive from taxation income, false community expectations about the role of government have been created, which will be ever more difficult to wind back.

A failure of political leadership led to inaction until faced with imminent collapse.

This has led to a series of bailouts in the EU funded by the wealthier member nations.

However, the failure of massive bailouts to stabilise the situation has led to growing resentment among taxpayers in Germany, France and other European nations who have been footing the bill.

In turn that resentment has contributed to the controversial policy of austerity, championed by Germany, which imposes strict spending controls on governments in receipt of bailout funds.

Political turmoil was inevitable in those nations struggling under the weight of government debt.

There have been instances of strong leadership that ensured genuine efforts were made to meet the terms of the bailouts.

This would have ensured relative stability, despite significant angst and opposition to the policy of austerity.