Russia turned down the offer to bail Cyprus out of a jam and now the island is going back to the drawing board to try and pull off a financial miracle. The European Union said that if Cyprus doesn't find a way to raise 6 billion euros by Tuesday, its central bank will cut off emergency funds and cancel the bailout deal that had been negotiated last weekend. Without the bailout, Cyprus's entire banking system—and by extension, its government—could collapse, possibly forcing them out of the euro currency altogether.
Cyprus's finance minister had spent the entire week in Moscow trying to convince Russian investors to give them new loans or at least make a sizable investment in the Cypriot assets like oil and gas drilling. However, after several days of negotiations the Russians say that they aren't interested in taking on the island's natural deposits (since there isn't that much anyway) so both sides have now walked away from the table.
The broken down talks leave the government in a mad scramble to work out a deal that can both satisfy the European Central Bank and pass through parliament in Cyprus. The government says it's in the final stages of negotiations and could vote on a new proposal before the end of the day on Friday. The options currently being discussed include bundling the few remaining state assets that are worth anything (like government pension funds and revenues) into a "solidarity fund" that can be used as the backing for new government bonds. There are also various plans to split or restructure the weakest banks, but all the choices seem like picking the best of a lot of bad options.
The deal could also probably include some modified version of the worst option of all, taxing bank deposits, but there is talk that insured deposits (up to 100,000 euros) would be protected.
All in all, it's been a rough week for Cyprus President Nicos Anastasiades, who has been on the job for less than a month. No matter what happens, Cyprus will come out of this crisis as a changed country. The only trouble is that the change will happen very, very soon—and right now the people of Cyprus can only guess what that change will look like.