Lawmakers in Cyprus turned down a €10 billion package from the European Union yesterday, calling it not a bailout but blackmail. It would have taxed ordinary bank deposits and left bondholders alone, a widely-criticized move that all but ensured its defeat.
The European Central Bank had threatened to "halt liquidity" if Cyprus didn’t push through the bailout package, but after the Cypriot Parliament turned them down the bank backpedalled, saying it would keep sending money their way. But this crisis, another in a long list for the E.U., isn’t over yet. Cyprus president Nicos Anastasiades will need to rework a plan that he can pass in parliament to lift the country out of its dire financial hole.
Joseph Cotterill has been reporting on this for the Financial Times. Lee Buchheit has been an advisor to many countries with soverign debt problems. He is a partner at Cleary Gottlieb Steen & Hamilton.