Is Cyprus Playing With Fire?

source: http://www.flickr.com/photos/alfmelin/

“They have completely abandoned us on the edge of an abyss,” noted one Cypriot protest Friday at a rally outside the island nation’s parliament. The demonstration — covered by Reuters — comes as the clock ticks down to a Monday deadline set by the European Central Bank for Cyprus’s legislators to strike a deal before it stops funding the country’s banks, a move that could potentially push Cyprus off the euro and prompt a financial sector collapse. equivalent

The news that the European Union’s $10 billion euro ($12.9 billion) bailout deal would be dependent on a levy on bank deposits of all amounts, even for smaller savers, outraged Cyprus’s citizens, and concern that any bailout deal will hurt Cypriots remains high; Friday’s rally featured several hundred demonstrators demanding compensation for their losses at the banks, according to The New York Times.

Earlier this week, the 56-member parliament voted on and rejected the controversial levy on bank deposits that finance ministers made a condition of the bailout package that was requested by President Nicos Anastasiades. The vote severely complicated the currency bloc’s efforts to stabilize its economy.

With pressure mounting from the ECB, members of the Cypriot Parliament prepared to vote Friday on yet another international bailout deal. The plan sent to parliament, devised by Anastasiades, would nationalize pension funds from state-run companies and conduct an emergency bond sale to raise the 5.8 billion euros required to unlock the bailout funds…