By Henry Blodget

Cyprus and the EU reached a new late-night bailout deal last night that will reduce the chance that Cyprus’s financial system and economy will completely implode.

The 10 billion euro deal requires Cyprus to drastically shrink its banking sector, which has grown to 8Xs the size of the country’s economy, by unwinding Cyprus’ second largest bank, Laiki. In doing so, bondholders and depositors with more than 100,000 euros will take a hair cut.

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