Cyprus: For the record. Cypriot lawmakers 19 March overwhelmingly rejected an EU bailout proposal that would have required a tax on deposits in the country’s banks. Thousands of demonstrators burst into cheers and applause as their MPs on Tuesday voted down the EU bailout plan aimed at rescuing Cyprus from bankruptcy.
The Finance Minister flew to Moscow to seek Russian assistance to prevent insolvency by Cypriot banks. EU officials reportedly are stunned that the EU bailout scheme was rejected because it would have been paid mainly by Russian depositors in Cypriot banks.
Comment: The action of parliament averted widespread street disorders, at least for now. The Russians or Russian firms have several options for recapitalizing Cyprus as a banking center. If they decline, however, Cypriot banks would not be able to cover deposits, according to analysis in the Financial Times. Cyprus might eventually become the first EU member to be ejected, but for now Nicosia is not burning.
Meanwhile leaders in other European states with weak economies reassured bank depositors that they deposits were “sacred.”