The Cyprus Parliament rejected a bail out plan that would have seized almost 10% of private savings deposits and used the money to bail out Cyprus banks.  The vote was almost unaminous:

Cypriot legislators in the capital Nicosia voted 36 against the proposal with none in favor in a show of hands today. There were 19 abstentions.

The ECB was quoted as saying they will provide liquidity to Cyprus banks, yet no press release has been issued.

"No decisions have been taken so far because we don't know the final results of the discussions in Cyprus, but given the present legal background, the ECB will be prepared to fulfil this task of a lender of last resort," Nowotny told news agency Dow Jones in an interview.

The Financial Times asks where was the European Central Bank in all of this:  Why the harsh treatment of tiny Cyprus?

Two aspects of the ECB’s role are striking. First was its threat to bring down the Cypriot banking system if a deal was not reached – which jarred with the assurance last July by Mario Draghi, president, that the ECB would do “whatever it takes” to preserve the eurozone’s integrity.

Second was the ECB’s failure to stop Cyprus trying to finance its part of the rescue plan by imposing a levy even on bank deposits smaller than €100,000, the level supposedly guaranteed under a cross-EU pact. Throughout the Eurozone crisis, the ECB has understood likely market reactions; it would have realised the incendiary consequences of such a step.

The Washington Post put up a host of new scenarios on Cyprus alternatives, none which involve nationalizing the banks, declaring them bankrupt and wiping out the Greek bond debt.  There is a lot of focus on Cyprus being a Russian tax haven and thus justified in seizing deposits, yet earlier we saw reports this is not the majority of bank savings deposits in Cyprus.

Generally speaking there seems to be a war on savers and nailing Cyprus for being a tax haven is kind of a joke (the Caymans, state of Delaware, Panama, GE, Microsoft, Cisco, Google.....)

One thing is certain, Cyprus just stood up to enormous pressure and listened to the people.  The protests erupted almost immediately and little Cyprus just stopped the Eurozone from crossing a line that should never be crossed in banking, taking private money and using it for themselves.

One day after the outright rejection of using savings deposits to bail out the banks comes another outrageous proposal.  This one is to turn pensions into bonds in order to bail out the banks.  It is also resoundingly rejected by Parliament:

Cypriot authorities proposed turning pension-fund assets into government bonds in a bid to raise about €4.2 billion of the €5.8 billion the deposit tax would.

The IMF, ECB and European Commission rejected this proposal.  Yet part of the new plan was to wind down two Cyprus banks:

Cyprus's counterproposal would also see the country's two biggest banks—Laiki Bank and Bank of Cyprus PCL —wound down, their bad assets transferred into a bad bank and their good ones merged into a new smaller entity.

The Cypriot government hopes to sell the good bank to Russia's VTB Bank, one person said. Cypriot Finance Minister Michalis Sarris was in Moscow Wednesday to promote this deal in talks with Russian government officials.

But the troika also wasn't satisfied with this part of the plan because of concerns about who would pay for the bank resolution and the impaired assets, one official said. VTB on Wednesday said it has no plans to take stakes in Cypriot banks.

Supposedly the good bank - bad bank proposal is from the IMF.  Clearly Cyprus needs some way to wipe out all of the debt accrued through now worthless Greek bonds.  

The EU just gave Cyprus and ultimatum.  They have four days or else to come up with the €5.8 billion.  The threat is to kick them off of the Euro..

In stark twin warnings on Thursday, the European Central Bank said it would cut off liquidity to Cypriot banks and a senior EU official made clear to Reuters that the bloc was ready to see the bankrupt island banished from the euro in the belief it could then contain damage to the wider European economy.

The ECB ultimatum came as the island's leaders struggled to craft a "Plan B" to raise the 5.8-billion euro contribution demanded by the EU in return for a 10-billion euro ($13-billion) bailout from the EU and IMF;

This is when the Cyprus Parliament is voting on a new proposal to restructure their banks, although the details are sketchy.  This implies wiping out bad debt,  There are also reports of guaranteeing savings deposits up to €100,000.

On March 22, Cyprus Parliament voted to restructure their second largest bank and it looks like the new bail out terms are even worse.

Parliament in Nicosia passed two key bills that would allow it to close down its second largest bank, Popular Bank of Cyprus, and aggressively curtail the free flow of money on the island. The bank restructuring law would see depositors in Popular Bank, also known as Laiki Bank, to lose as much as 40% of their savings above €100,000,

That wasn't enough to dig up the €5.8 billion being demanded by the IMF, ECB and European Commission, so now it is reported they have another deal, a 20% tax on deposits at the Bank of Cyprus and a 4% levy at other banks.  In other words, seizing private deposits.  According to the Guardian there is €30 billion in Russian deposits in Cyprus banks.  Now there is speculation Russia will retaliate if their savings accounts are seized.

Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy."

Nekrassov rejected suggestions that Russia might hit back by cutting off gas supplies, a tactic the country used in 2009 after the collapse of talks with Ukraine to end a row over unpaid bills and energy pricing.

"Gas is no longer a weapon," Nekrassov said. "When Russia did that before, it realised that the foreign energy lobby reacted and efforts to find alternative sources were increased. If Russia kept threatening, it knows that nobody would be buying its gas in 20 years' time."

Mike Ingram, an analyst at City broker BGC Partners, said: "In Russia, historically, if they want an asset they just grab it. If they want cash out of a [EU] business [in Russia] they just create a tax bill or raid offices and make your life unpleasant. They could also make life difficult diplomatically on issues such as Syria. They might also rattle a few sabres over deployment of the missile defence system."

Seems they are not going to just restructure their banks and are going after private savings no matter what, as demanded.  Brother, can you spare €5.8 billion?

A deal has been reached at the final hour and it ain't pretty.  Laiki Bank is going to be closed with the senior bondholders taking the losses.  Saving deposits of less than €100,000 will not have any of their deposits seized while those with deposits greater then €100,000 will.  Since now the burden to come up with the €5.8 billion is on the rich, they won't say what the percentage of the deposit seizure will be, but one can bet it will be much greater than the original 9.9%.

Savers with deposits of less than €100,000 (£85,000) would be spared but it was thought there would be heavy losses inflicted on the deposits of the wealthy.

Laiki, or Cyprus Popular Bank, is to be closed, with its good assets transferred to Bank of Cyprus, the country's biggest bank, where savers would suffer big losses in return for equity shares. Those with more than €100,000 in Laiki would also be hit hard.

What is odd is the blame of Russian depositors and claiming Cyprus is a tax haven.  Why then the deal does not just seize those Russian deposits isn't clear.  We'll update this article with what happens next.