I had written earlier that the Cypriot parliament would likely have to institute some kind of deposit tax--even after it had voted down one version--because the Troika (ECB/International Monetary Fund/euro zone partners) had given the Cypriots an ultimatum: We will give you 10 billion euros in aid, and no more. Need 17 billion? Go raise the other 7 billion. And the implicit threat was that the ECB may not continue to backstop the Cypriot banks.
That's what started this whole thing about the deposit tax. But now, the ECB has extended an olive branch: it said that it would continue to provide liquidity to Cypriot banks, even though the Cypriots voted down a deposit tax.
This raises an intriguing question: Will the Troika blink? Instead of insisting that Cyprus find some way to raise the money, will the ECB/IMF/euro zone blink and give the tiny island country the whole 17 billion euros?
The official reason it refused to give Cyprus all the money was that it would make the debt-to-gross domestic product ratio too high, but the unofficial reason was that the Germans wanted to talk tough on austerity.
My bet is that it is unlikely the Troika will blink—it would be bad for members to appear to be soft on this. But there may be some modification of the terms. Maybe an ECB special fund is found for a few billion more euros.
And there is always the possibility that some third party could ride to the rescue. The finance minister, Mr. Sarris, is supposed to be flying to Russia for a meeting.
Perhaps the Russians—in exchanges for certain "guarantees" (board seats on Cypriot banks?) will extend new loans to the Cypriots? This will not eliminate the debt-to-GDP ratio problem, and the IMF is likely to object to this solution as well.
That's why I think this solution is unlikely.
But at least the Troika will not be on the hook. Mr. Putin, after all, has much less, er, demanding constituents.
—By CNBC's Bob Pisani