Unclear. I might have spoken too soon last night — Cyprus rejected the insidious ‘deposit haircut’ idea because of the wild public outcry — but a modified version along with other options are still on the table, ranging from full default to Russian takeover. They’re not out of the woods yet, from the WSJ:
What happens next isn’t clear. A senior European official said after the vote that the euro zone would continue to wait for a counterproposal from Nicosia, outlining how it would raise the €5.8 billion it needs in order to secure the €10 billion bailout it had agreed upon with the euro zone and the International Monetary Fund.
“The ball is now really in Cyprus’s court,” Eurogroup President Jeroen Dijsselbloem said on Dutch television after the vote, adding there would be no new money for Cyprus beyond the amount already set. …
“It’s anybody’s guess what the developments will be from this point on,” said Theodore Couloumbis, professor emeritus in international relations at the University of Athens. “My hope is that there will be a renegotiation. But it appears that a catastrophic scenario is not out of the question—and that is bankruptcy that could lead to a Cypriot exit from the euro zone.” …
As meetings among the country’s political leaders, lawmakers and bankers continued for a fourth day since the bailout deal was reached, central bank Governor Panicos Demetriades warned lawmakers that prolonged uncertainty for the country’s banks could lead to depositors withdrawing their money if confidence wasn’t restored soon.
As Ed outlined yesterday, Russia is offering to lend a helping hand to the tiny island nation (with some very serious strings attached — “Russian officials have said they would condition further aid on Cyprus disclosing ownership details on Russian accounts there”), and after rejecting the terms of the European deal, Cypriot officials are now actively seeking Russia’s assistance.
Cyprus pleaded for a new loan from Russia on Wednesday to avert a financial meltdown, after the island’s parliament rejected the terms of a bailout from the EU, raising the risk of default and a bank crash.
Cypriot Finance Minister Michael Sarris said he had not reached a deal at a first meeting with his Russian counterpart Anton Siluanov in Moscow, but talks there would continue.
Russia’s finance ministry said Nicosia had sought a further 5 billion euros, on top of a five-year extension and lower interest on an existing 2.5 billion euro loan.
Good grief. I’m pretty sure that there’s no real non-painful way to claw your way out after cornering yourself into a debt crisis — but Cyprus was the first national legislature to reject the conditions for an EU bailout, and the EU has rather a knack for getting the smaller bailout-seeking countries to eventually agree to their terms.