Abstract. The financial crisis in Cyprus, which broke out in early 2013, was one of the most remarkable economic events of the year. The article discusses its causes, investigates the processes that took place in the national economy and propelled the country into crisis. The paper contains detailed overview of events around the ready-to-collapse Cyprus banking system, analyzes the government’s program of economic reforms. Particular attention is paid to the impact of the crisis on Cypriot, Russian and EU economies.