I don't think that the size of a country really has anything to do with whether or not it can or cannot fail. Take a look at Iceland for example. They are a small nation and their currency essentially detonated during the 2008 financial crisis. Cyprus is no different in this case.
I believe that the size of a country is a non factor in determining whether or not it is prosperous. Regardless of size every nation has to deal with the same things. Nothing changes due to size. A country still has to deal with politics, crime, justice, economics, societal issues, etc.
Economic Downturn, local politics, running out of natural resources. There are thousands of reasons why Cyprus can fail. The size does not matter. Any of these could topple even the largest of countries.
While they are doing everything in their power and the outlook does look bleak, I believe that they are the 'little engine that could' and will pull themselves out of it.
There are countries way smaller than Cyprus doing well. I don't see what size has to do economic success. If it fails, it's for other reasons, not because of the size. But if it does succeed, it has nothing to do with its size. It will succeed and fail based on its economy.