The handling of the Cyprus bailout threatens to derail all the hard work that has gone into boosting sentiment in the euro zone following jitters over Greece, Spain and Italy last year, said analysts.
In July, against a backdrop of surging Spanish debt yields and fears that the euro zone was on the verge of a break-up, the European Central Bank President Mario Draghi pledged to do “whatever it takes” to save the euro, which helped restore confidence.
However, news of a European Union deal for Cyprus that asks bank depositors to contribute towards a bailout by paying a levy, prompted panic over a contagion risk to the rest of Europe.
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