Long story short:  Cypriot lawmakers rejected the 10 billion euro bailout package which would have included either a 6.75% or 9% one-time tax on deposits.  (IIRC, 6.75% on amounts up to 100,000 euros and 9% on funds in excess of that.)  Cypriot banks remain closed and people in positions of authority are trying to come up with Plan B.  (Banks closed?  Did someone say “bank run”?  Imagine that.)

Jared Bernstein is puzzled as to how Plan A came to be suggested in the first place.  So is Dylan Matthews.  As is Ezra Klein.   I have no idea what Plan B will be but whatever it turns out to be I don’t imagine it will play well for the euro zone.

Matthews gets the award for dark humor in his assessing the possibility of Russia bailing out the Cypriots:

Russia has a vested interest in Cyprus not collapsing in on itself. For one thing, the Russian government relies on it as a means of funneling arms to Syria to help it kill its citizens, a project that most governments understandably shy away from. But more importantly, Russian banks have lent $40 billion to Russian-controlled businesses on Cyprus.

…Russia would likely demand something in return [for the bailout]. That something might be a share of Cyprus’s bountiful natural resources, not least of which are its significant natural gas deposits. Gazprom, the world’s largest extractor of natural gas which Putin nationalized in his previous tenure as president, has offered to bailout Cyprus itself. All the island has to do in return is give Gazprom all of its natural gas. It’s also possible that Russia would want Cyprus to crack down on the many Russian oligarchs who use the island for money laundering and tax evasion. That would deprive the Cypriot banking sector of a significant source of revenue.