To Europe's relief, an agreement was finally reached Sunday in Brussels on a $13 billion bailout of European Union and eurozone member Cyprus.
Greek Cyprus and its 838,000 people, who inhabit 59 percent of the island with the rest in the hands of Turkish-origin Cypriots, has to come up with $7.5 billion as its part of the deal. It will require major strain to do so. Its efforts will include closing its second-largest bank, Laiki, and the likely seizure through a special tax of a percentage of depositors' bank accounts that exceed $130,000. Deposits of less than that are insured and, so far, safe.
The measure will require approval by some other eurozone members' parliaments, but not by the Greek Cypriot body, which handed over authority to craft the deal to President Nicos Anastasiades. Lenders include the European Central Bank and the International Monetary Fund.
The bailout comes after the Cypriots squirmed for weeks to avoid the terms. At one point the government was going to hit all bank accounts with a tax, but the parliament rejected that measure. Its financial officials then went to Moscow to try to get the government of President Vladimir V. Putin to extend a major loan, based on the fact that a considerable amount of the funds in Cypriot banks are held by Russians in order to launder money, avoid taxes or simply try to earn the high interest rates that had been offered.
Ordinary Cypriots did not feel they should have to make up the shortfall since it was bankers, to a large extent gambling on Greek bonds, who had landed the country in trouble. Greek bonds collapsed when Greece itself fell into grave financial difficulties, from which it has yet to emerge in spite of mighty efforts on the part of the rest of Europe.
Why did the rest of the eurozone care if Cyprus defaulted on its debts or even left the eurozone? The basic reason was that such a failure would set a bad precedent in case a larger economy such as Italy or Spain fell into the same difficulties. The size of Greek Cyprus means that it doesn't matter much by itself, although its collapse would be embarrassing to the rest of the EU and the eurozone.
The drama over Cyprus didn't matter much to the United States, although American traders made as much of it as they could, running the markets up and down as the bailout was worked out, taking percentages of the buys and sells. It is nonetheless helpful that the Cyprus problem was resolved and it is likely that European and other countries with big debts took note.