SOCGEN: 'Depression For Cyprus'

Euro zone leaders have finally structured a deal to bail out Cyprus' financial system.

But the terms come with harsh austerity and a massive deleveraging requirement.

"As part of the agreement, the Cypriot financial sector will be downsized to match that of the EU average by 2018," writes Societe General economist Michala Marcussen.

So, Cyprus' financial system may have been saved (for now). But it doesn't mean all will be well in the economy.

Here's Marcussen:

Depression for Cyprus: Our Cypriot GDP forecast entails a drop of just over 20% in real GDP by 2017. This forecast had already factored in much what was agreed, but did not account for the additional uncertainty shock generated by the past week’s appalling political mess. Risks are clearly on the downside and Cyprus will in all likelihood require additional financial assistance further down the road. Accounting for less than 0.3% of euro area GDP, any downward revision to Cyprus will be barely visible on the euro area aggregate.

Depression, downside risks, and more bail outs. The Cypriot nightmare continues.