Cyprus's run on the banks

Had to do a double take reading this one. I can't imagine. Cyprus is the latest country to be bailed out of debt by the Eurozone, but very curiously the deposits of ordinary people are being raided to pay the debt. It was announced with no chance of people getting their money out before the tax is implemented, leaving people taking what they can out of ATM's. A run on the banks, surely one of the worst nightmares of economists.

Under an emergency deal reached early on Saturday in Brussels, a one-time tax of 9.9 per cent is to be levied on Cypriot bank deposits of more than €100,000 effective on Tuesday, hitting wealthy depositors - mostly Russians who have put vast sums into Cyprus's banks in recent years. But even deposits under that amount would be taxed at 6.75 per cent, meaning that Cyprus's creditors will be confiscating money directly from pensioners, workers and regular depositors to pay off the bailout tab. Read more

Rich Russians aren't going to be happy. This Euro debt crisis looks like it's going to go on for years yet. Indeed the fears are that other Eurozone countries could see a run on their banks too.

Jeroen Dijsselbloem, president of the group of euro-area ministers, on Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered. Read more

And the scare doesn't end there. Indeed it's being felt all the way down here in Australia.

While Europe has imposed tax on Cypriot bank deposits to help pay for the €10 billion bailout, this tax would not have extended to Australian-based subsidiaries. 

Even so, Australians that have funds on deposit in banks in Cyprus would still face being hit with the new bank levy, which includes a scaling tax on deposits that starts at 6.75 per cent. 

Australian banking exposure to Cyprus is small, running at just $76 million, according to Bank for International Settlements figures. Read more   

Whoever has that money in Cyprus is going to be pretty bloody pissed off right now.