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Cyprus's second attempt at a rescue plan was targeting a more deserving cast of victims. The island's parliament, which blocked the tax on small savers earlier this week, was called to vote on a new scheme. Stuffing large depositors of the country's second-largest lender into a bad bank was fairer than the original proposal. The scheme's main problem is that it has so far failed to convince Cyprus's euro zone partners.

The basic idea of the banking part of the plan may still survive. It is to carve accounts with deposits of less than €100,000 ($133,00) – the amount theoretically guaranteed by the state – out of Laiki, along with some of the bank's better loans. These could be transferred to Bank of Cyprus, a healthier rival. The remaining larger deposits, held in 18,000 of the bank's 379,000 accounts, would be placed in a bad bank, along with Laiki's remaining assets.

Whether this is viable depends on Laiki's current state. If a rumoured plan to hive off the lender's €9.9-billion Greek loan book comes to fruition, Laiki, also known as Cyprus Popular Bank, would be left with just over €10-billion in deposits and loans. Assume insured deposits are less than half that amount, and the bad bank would have a little over €5-billion to absorb losses.

That would protect small savers and knock €2.3-billion off the €5.8-billion that Cyprus needs to contribute towards the bailout, according to politician Averof Neophytou, quoted by the Greek newspaper Ekathimerini. The bad news is that uninsured depositors would be exposed to serious risks: 17 per cent of Laiki's Cypriot loans were already non-performing as of September, and this proportion will rise. Cyprus would also need to impose some kind of controls to prevent a flight of the bad bank's remaining deposits.

Cyprus still needs to find another €3.5-billion. Prospects aren't good. The government put forward the vague idea of cobbling together a sovereign wealth fund with pension, gas and even the church's assets. Euro zone officials and the European Central Bank understandably look like they will reject the plan as too vague. The threat that the ECB could stop providing liquidity for the banking system remains. So does the crisis.

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