On Tuesday the Cypriot parliament not only rejected the original deal, it rejected a revised package exempting those with deposits under €20,000.
It didn’t just reject it. Not a single MP voted for it. Thirty-six MPs voted against, 19 of the president’s party’s MPs abstained. No one voted in favour.
The Cypriot vote is a watershed. For the first time in three years of the banking and sovereign debt crisis in Europe an institution has voted no. That crisis is, of course, an expression of a deeper global slump. But the ways it has manifested have depended on the particular architecture of the competing interests that make up the EU.
The Greek parliament — at the price of bleeding the political centre — voted through the savage austerity memoranda, which in 2011 also meant a hit for holders of Greek sovereign debt. That move pushed the Cypriot banks over the edge.
The Italian political class, in its majority, voted for the pain and accepted, as did their Greek counterparts, the imposition of a non-elected prime minister, Mario Monti, to see it through. Last month saw an electoral revolt against the Italian political class.
Now there is little Cyprus. Not only the mass of people, but now also an institution — the Cypriot parliament — has said no. A small child (Cyprus joined the EU in 2004 and the single currency in 2008, accounting for just 0.2 percent of the union’s economic output) has told the rest that the emperor has no clothes.
The profound significance of that will play out as there is now both a desperate scramble to reassemble some deal over Cyprus’s banks (Russian takeover? Exceptional European Central Bank cash? Creative destruction?), and deepening opprobrium across the south of Europe at those politicians who said that the only game in town was austerity in order to secure a bailout.