Citizens of the Mediterranean island nation of Cyprus began making panicked runs to the ATM to withdraw their cash as the government came to an agreement to pay off the country's massive debts...by sapping away 6.75% of whatever money they had in the bank!
Cypriots reacted with shock that quickly turned into full-scale panic and anger on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10 billion Euro ($13 billion US) bailout agreed upon in Brussels yesterday. In the agreement, people with less than €100,000 in the bank would be taxed 6.75% while those with over €100,00 would see a tax levy of a staggering 10% against their cash savings! [It could have been worse; there are reports that the International Monetary Fund was demanding an earth-shattering 40% of any savings Cypriots had with the banks!]
Cypriot president Nicos Anastasiades has said that without a European bailout, the country would definitely default on its extensive debts, which would have a ripple effect throughout the continent, and indeed the rest of the world. Anastasiades, who was elected only last month on a promise to tackle the country's debt crisis, will make an official statement to the nation today.
Cyprus is the fifth nation after Greece, the Republic of Ireland, Portugal and Spain to turn to the Eurozone for a financial handout over the past three years during the region's strangling debt crisis. Citizens began standing in line at banks hours before they opened, hoping to be able to withdraw their money before the tax levy took into effect on Tuesday, as tomorrow is a bank holiday in Cyprus. ATMs quickly shut down across the country due to "technical issues" over the bank run. Protestors also began to gather in front of the presidential palace in the capital city of Nicosia to make their angers and fears known.
Russian president Vladimir Putin is said to be enraged over the decision, as billions of dollars kept in Cyprus by wealthy Russian citizens will now be gobbled up. "Trust towards Cyprus as a safe place for placing money will be reduced to zero," he told the Interfax agency Anatoly Axanof, MP and president of the Association of Regional Banks of Russia. Putin also made an angry call to Nicos Anastasiades on Sunday, telling the Cypriot president, "It would have been better to put the German flag at the Presidential Palace. Do you not understand that this decision will destroy your country?"
Could the Cyprus bail-out and subsequent thievery of its citizens be the Black Swan Event that topples the global economy? [Update: The "bank holiday" has been extended through today (Tuesday, March 19) with indications that the banks may remain closed until Friday, as confusion and panic continues to sweep the European financial markets. This means that citizens will be unable to access any of their money for almost an entire week, a virtually unheard of situation.]