A late-night agreement between European finance ministers and the government of Cyprus will keep Cyprus in the eurozone and bail out the struggling island nation—by levying an enormous one-time tax on the biggest deposits in one of its banks. Under the deal, the Cyprus Popular Bank, or Laiki, will be divided into a "good" bank and a "bad" bank; the Goofus will be slowly wound down and closed while the Gallant will be folded into the country's largest bank, Bank of Cyprus. Deposits of over 100,000 euros in both banks will be subject to a haircut of as much as 30 percent—but unlike last week's controversial proposed plan, this deal will not tax smaller depositors. The Cyprus bailout deal has been difficult to reach for a variety of reasons, chief among them the country's desire to preserve its banking sector, the engine of its economy, and the eurozone's desire to punish the Russian oligarchs widely believed to be the largest depositors in Cyprus' banks. ("In my view, the stealing of what has already been stolen continues," Russian President Dmitri Medvedev said in response to the latest deal.) This bailout agreement should allow Cyprus to (sort of) remain in the eurozone (against the wishes of the majority of its citizens; "luckily," no one in Cyprus is voting on the package) and eventually recover its banking income without directly taking money from the little guy—but years of enforced austerity will hurt him just as badly. No one's happy. At least they're less unhappy than they were last week? [Telegraph | QZ | Reuters]

Respected economist Mario Monti has been asked by Italy's president to form a new government. We'd point out that "respected technocrats" were the guys who got Europe into this mess in the first place, but, shit, anyone's better than Berlusconi.