Cyprus' parliament recently voted down the proposed European Union bailout package that threatened a levy, or tax, on all bank deposits as a condition of continued emergency funding. Now, like many borrowers in a tight situation, Cyprus must consider other options that are just as unpalatable.
-Michelle Gibley, director of international research, Schwab
Key Points
- A deal for Cyprus is still likely, but there is an increased risk the country could exit the euro.
- We believe that, whether the country opts for an exit from the euro or a deal that taxes depositors, contagion will be contained.
- Should Cyprus exit the euro, we expect some resulting market volatility—but it's likely to be short term
