On Saturday, the European Union announced a bailout plan to rescue the country from its current economic woes, a la Greece, Ireland and Portugal. However, in a new twist on the bailout package, the depositors in the struggling banks would be forced to pick up part of the cost of the package, instead of the burden falling only on the bondholders and shareholders. The deposits would be assessed a one-time “tax” of 9.9%, for accounts holding over 100,000 Euros, and 6.75% for smaller accounts.
This announcement precipitated an unanticipated run on the banks in question; since the announcement was made on a Saturday, when the banks were closed, the deposit-holders descended on ATMs in the thousands, attempting to pull their deposits before the tax could be implemented.
Banks had to limit withdrawals to only 400 Euros each, and still the ATMs ran out of cash long before customers were satisfied.
On Monday, Cyprus parliament delayed their vote on the bill, and kept banks closed, in an attempt to stem the tidal wave of fear that is sweeping the country. EU officials are scheduled to hold an emergency conference later in the day to decide what to do.
The move has upset investors in all European countries, who now fear that their deposits are not safe. Such mistrust has caused European bank stocks to fall on world markets, which then extended to include stock markets all over the world.