The current economic turmoil together with a number of other factors seems to have Cyprus up the proverbial creek without a paddle.

The Mediterranean isle serves as a hub for many online gambling financial transaction companies and ironically enough, it is that very industry that is giving it headaches as the Cyprus Mail reports that internet casinos and illegal gambling is costing it a sizable chunk of change.

"Combined, online casinos and illegal gambling are costing the economy a whopping €2.5 billion a year as authorities grapple with ways of controlling the activity," reported the newspaper citing a remark made during a House Institutions Committee session.

During that session, Cyprus finance minister Charilaos Stavrakis was questioned on why the island has no legislation in place that clarifies whether online gambling is regulated or illegal.

Much of the activity which is considered illegal gambling takes place at cafes and sports bars and the only way law enforcement officials can limit the activity is to catch bettors in the act and even then, the punishment doesn't really fit the crime—people caught breaking the law only face a fine of €1500.

According to officials, law enforcement has seized an estimated 5000 computers, located a pair of online gambling game servers which are said to have seen €6 million wagered.

But online gambling regulations or restrictions aren't a black and white issue and Cyprus would be wise to take everything into consideration before coming to a decision.

There are European Union laws in place that allow for free trade and any legislation that hinders that could cause trouble.

Regardless, Cyprus is said to be pushing a piece of legislation that would "give Cyprus an exemption from complying with the free movement of services, where betting and gambling is concerned" says the Cyprus Mail.

Cyprus is also said to be speeding the proposal through the legislative process but the prospective legislation would need a mark of approval from the European Commission and some consider it a long shot, although Greece has received the green light for a similar proposal.

"It pains us to see that Cyprus has become a free-for-all when it comes to illegal gambling," explained Ricos Erotokritou, who serves as the chair of the House Institutions Committee.