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Forex Flash: Cyprus quagmire lingers on – Deutsche Bank

FXstreet.com (Barcelona) - In many ways the recent Cypriot drama and rejection has led everyone back to square one as the fact that the revised version of the bank levy suggests that the "reprofiling" of the levy, which was open to negotiations with the troika, was not the main issue.

“More likely, it is the very principle of a bank levy - and the adverse consequences it would have on the country's standing as an off-shore center, which is being overwhelmingly rejected by Cyprus' political circles.” notes Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.

It is obviously a setback for the EU, but as our Economists note, reaching a deal on the adjustment program at the first attempt has always been tough since the beginning of the crisis. “Rationally they think the Cypriot government and parliament will have to accept the deal, at least the principle of a deposit levy, even if some sweeteners may have to be found (e.g. on the austerity measures).” they add.

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