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Does Cyprus' tax vote mean an exit from euro?

Cypriot protestors wave banners during a demonstration against an EU bailout deal outside the parliament in the capital, Nicosia, on March 19, 2013. The speaker of the Cypriot parliament urged MPs to say 'no to blackmail' in a vote on a eurozone bailout aimed at saving the Mediterranean island from bankruptcy.

Just when you thought it was safe to take your eye off the European economy, Cyprus throws you a curve ball.

The small nation of Cyprus voted "no" on a bailout that would have levied a tax on savings accounts held in Cyprus' banks. Instead, the precarious economy of Cyprus remains exactly that. And that raises the question -- at this point, is it just easier for the eurozone to kick someone out than risk stability of the euro?

Years of bailouts to EU member nations won't make rescuing Cyprus' economy any easier. There is a huge hole in the Cypriot banking system and it's got to be filled. The rest of Europe, and particularly the Germans, are suffering bailout fatigue. 

And, Russia's cozy relations with Cyprus -- and the number of Russians who use Cypriot banks to stash their cash -- have done no favors for the Mediterranean island when it comes to getting in the good graces of the EU.

There has been some talk of a Russian energy company trading cash for access to Cypriot natural gas. But that's a deal Cypriots might not be prepared to make.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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