Cypriot lawmakers overwhelmingly rejected a deeply unpopular tax on bank deposits on Tuesday, throwing into doubt an international bailout for the troubled euro zone member needed to avert default and a banking collapse.
The 56-seat parliament voted by 36 votes against and 19 abstentions to bury the bill, a condition of a 10 billion euro European Union bailout for the Mediterranean island. One deputy was absent.
First, I commend the Cypriot lawmakers. Of course this will likely go back to vote, again and again, until they "get it right".
Second, please note the rumor mill was wrong as I expected. The Telegraph Live Blog reports "Michalis Sarris, Cyprus's finance minister, is definitely staying put. He's just sent Bloomberg a text message to say just that, the newswire reports."
Third, expect pressure on Cypus from the ECB, EU, Russia, the IMF, US, and UK.
Finally, expect banks and the stock market to remain closed until parliament approves some face-saving deal, or Cyprus abandons the euro and returns to the Cypriot pound.
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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