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Europe, Cyprus look for way out of crisis. Could Moscow save the day?

The now-rejected bailout tax plan has left Cypriots and Europeans alike unhappy. Now Cyprus is looking to Russia for money.

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Cypriot government officials and party leaders met today at the Presidential palace in Nicosia to find an alternative plan to raise 5.8 billion euros to finance a bailout at the presidential palace in Nicosia. Cypriot lawmakers have rejected a critical draft bill that would have seized part of people's bank deposits in order to qualify for a vital international bailout.

Petros Giannakouris/AP

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As Cyprus, the eurozone’s third smallest economy, is staring state bankruptcy in the face, European leaders are scratching their heads: How did we end up in this mess? And, more importantly, what is the way out?

In spite of the potentially devastating consequences, the Cypriot parliament on Tuesday vehemently rejected a bailout deal for the technically insolvent country hammered out in Brussels a few days earlier. Under the deal, 10 billion euros ($13 billion) would have come from the eurozone’s rescue mechanism, but it would have obliged Cyprus itself to add another 5.8 billion euros ($7.5 billion). This additional money was meant to be raised through a one-off tax on each account held in Cyprus, and there is some confusion about where the idea for this special levy came from in the first place – Nicosia, Brussels, or even Berlin.

Whatever the answer, everybody is unhappy now.

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