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The Mediterranean island nation of Cyprus has until Monday, March 25, to agree to European Central Bank and International Monetary Fund bailout conditions, or its illiquid banks will be cut off from emergency funding. If the funding is cut, economists expect the country’s top banks to collapse. Aside from the obvious economic catastrophe this would cause Cyprus, the event would shock the euro zone’s already fragile economy and could negatively impact global markets.
If it seems dramatic, well, it really is. Reuters reports that on a conference call held by the Eurogroup Working Group — a consortium of deputy finance ministers and senior treasury officials — there was talk of Cyprus leaving the euro zone. Officials mentioned the need to “ring-fence” the rest of the euro zone in the event that Cypriot banks collapse to shield particularly weak economies like Greece from any fallout.
What is uniquely concerning, and has grabbed the attention of observers around the world, is the fact that Cyprus decided not to take part in the call. According to notes seen by Reuters, the French representative said that “The (Cypriot) parliament is obviously too emotional and will not decide on anything, if Cyprus does not even feel that they can attend the call it is a big problem for us.”
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