NICOSIA – Global markets tumbled Monday as new doubts spread about the solvency of the eurozone with the Cypriot government preparing to impose a new levy on bank deposits in order to qualify for bailout funds.
Finance ministers in the eurozone Sunday had demanded that Cypriots pay up to 10% of their bank deposits in exchange for 10 billion euro bailout package. Panicked residents of the Mediterranean island nation began withdrawing their money from their accounts to avoid being hit by the levy, which would take effect this week.
The latest events have shaken investors, who fear such a bank run could be repeated in other troubled European economies. Shares fell in both Asia and Europe as the trading week opened, while the euro plunged nearly two percent at its lowest moment Monday.
“Traders and investors are aghast as these measures,” said chief market strategist at CMC Markers in Sydney, Michael McCarthy to Bloomberg Television.
Photo by - Leonid Mamchenkov
The Cypriot government is reportedly working on a levy reduction from 6.7% to 3% for deposits under 100,000 euros. Anything above this amount would be taxed between 9.9% to 12.5%, according to a Reuters source close to the consultations.