Its time to review the floating rate system that I presume EU is adopting. In this system, the creation of money is through an entry in the book of accounts in the central bank. There is no back up for this entry because the gold standard is not in effect. This entry is then sold to the public or the lower banking system. If the entry is 10 billion Euro, this amount is created new money in EU. Then the next tier of banks will lend the purchased entries to lower tier of banks as loans to entrepreneurs. So this book entry is now an expansion of the economy of EU.
This summary of the floating rate system may be improved upon. The point is that entry in the book of accounts can be written off. In common language, forget about the loans. So instead of getting from the accounts of private citizens to reduce the debt of Cyprus, the debt should be written off.
But why will EU not write off the debt? It is protecting the monetary system of EU. If the debt of Cyprus were written off, other countries may come get a big loan then when unable to pay, ask for a write off of the loan. That way the EU monetary system losses integrity. The choice is between: protect the EU monetary system or protect the people.
This debt might be a signal for the review of the floating rate system. Now if the return of the gold standard may be considered, its flaws must be remedied. Virtually, there is now a return of the gold standard because of the Basil III ruling that gold is now made Tier I. I have a Hub "Should the gold standard return, its flaws must be remedied."