Cyprus keeps it interesting

We watch Europe quiet down, at least for a while, and then problems resurface. This time it's Cyprus.

The European Central Bank has done a remarkable job of holding the financial system in Europe together, but what is truly needed is economic growth. Until the recession in Europe ends, its under-capitalized banking system will remain under considerable stress.

Still, muted market reaction in the U.S and in Europe - a lack of reaction in Spanish and Italian debt yields - is signaling a lack of anxiety over contagion.

Monday is the deadline for Cyprus to accept German/IMF terms. If Cyprus rejects, its banking system will collapse, and we will likely see some renewed volatility, as the market tests ECB President Draghi's pledge to do whatever it takes to preserve the euro.

If Cyprus cries "uncle" (it really doesn't have much choice and that is what markets are pricing in), we limp through the latest euro-zone debt crisis.