There is a run on banks consequest to the Cyprus Government taking money out of bank Savings Account of people.
This created panic and there has been a run on the banks with people running to ATMs to withdraw money.
Banking is built on Trust.
If the Government, because of its financial imbroglio breaches it the Economic system will collapse along with the Society!
“As of right now, citizens of Cyprus are scrambling to withdraw funds from their bank accounts after the EU, with agreement from the Cypriot government, announced they will decimate funds held in personal bank accounts to the tune of up to 10% of existing deposits.
The European Union has made the determination that the people of Cyprus are now responsible for the hundreds of billions of dollars in bad bets made by their government and bank financiers, and they are moving to confiscate money directly from the bank accounts of every citizen in the country.
Restrictions have been imposed to stop people emptying their accounts or moving their money out the country after the Cypriot government announced that up to ten per cent of deposits will be seized and used to bailout the island’s crisis-hit banking system.
The deal with other eurozone finance ministers is the first time that ordinary citizens’ deposits have been directly raided in this way.
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One furious expat said: ‘This is plain theft. I’d love to hear someone explain to me why it isn’t.’
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Under the deal, all bank deposits over €100,000 will be hit with a levy of 9.9 per cent. Those with smaller savings will pay 6.75 per cent.
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The move sparked panic and violent protests yesterday as crowds desperately tried to withdraw their money at cash machines.
Related:
Cyprus’ President Nicos Anastasiades tried to calm his nation on Sunday, and convince lawmakers to vote for the bailout plan, which includes the deposit tax.
“A disorderly bankruptcy would have forced us to leave the euro and forced a devaluation,” he said in a speech.
The move is being closely watched by policy makers because of the potential to destabilize financial markets in Europe. The worry is that depositors in other financially weak, or bailed out, nations might fear similar bailout provisions in the future from the EU.
“The question is whether this becomes a full-blown crisis or a mini-crisis,” said Steven Englander, global head of foreign exchange strategy at Citi. “Depositors and investors elsewhere could easily see this as another in a string of ‘one-offs’ and react badly.”
http://money.cnn.com/2013/03/16/news/economy/europe-cyprus-bailout/
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