European policy makers weighed how far to push Cyprus after lawmakers in the Mediterranean nation rejected an unprecedented levy on bank deposits, throwing into limbo a rescue package designed to keep it in the euro.
Stocks and the euro gained as investors speculated that the European Central Bank, whose Governing Council meets today in Frankfurt, will continue to support the country's banks until next week. Chancellor Angela Merkel, saying she “regrets” the Cypriot parliament's decision, signaled a willingness to engage with Cyprus as long as its banks contribute to a bailout.
“It's important that Cyprus has a sustainable banking sector,” Merkel told reporters in Berlin. “Cyprus is our partner in the euro area and therefore we are obliged to find a solution together.”
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