Stock markets throughout the world dropped Monday in the aftermath of a bailout for tiny Cyprus, which included a first-ever bank deposit tax that rattled investors.
Stocks in Asia plunged 2 percent or more, with European and U.S. indexes falling by smaller amounts.
Meanwhile, Cyprus moved to revamp terms of the bank deposit tax that its international lenders imposed as part of a $13 billion bailout to keep the Mediterranean island nation from going bankrupt.
Cypriot officials were working with the lenders to cut or eliminate the tax on small investors, while raising it on those with bigger accounts. Cyprus's parliament, for the second day in a row, postponed a vote on a new plan and rescheduled it for Tuesday.
Cypriot banks were closed on Monday for a holiday and officials said they would remain closed until Thursday, to prevent a run on accounts.
Cypriots were angered by the deposit tax, with one domestic worker saying it is unacceptable.
"We cleaning ladies spend our entire days trying to earn some money in order to feed our children, and now they are saying they are going to take it from us? Its unacceptable! No! Not a single haircut, we will not accept any kind of haircut!''
Under bailout terms set Saturday by Cyprus's eurozone neighbors and the International Monetary Fund, a one-time tax of 9.9 percent would be imposed on deposits of $131,000 and up, while deposits under $131,000 would be taxed at 6.75 percent. The bank levy would hit everyone with money in Cypriot banks, including foreign nationals.
European officials said they would support cutting the levy on small depositors, but only if the revised tax still raised the same $7.6 billion agreed to in the overall rescue plan.
The Cypriot economy accounts for only a very small fraction of the eurozone's economic fortunes. But none of the previous bailouts for Greece, Portugal, Ireland and the Spanish banking system has taxed depositors.
Analyst Robert Halver of the Baader Bank said the fear is that depositors throughout the eurozone might view the Cyprus experience as reason to start withdrawing their funds from bank accounts. Such a run on banks could create a new crisis for European governments, now in the third year of their debt crisis.
"What has been done in Cyprus is an experiment. If the population has to, in the form of their savings, contribute to rectify the mistakes that have been made in Cyprus, then there is a danger that in other countries people will decide, at the breakfast table, to withdraw their money. If money is withdrawn on a great scale, if we have a bank run, then we see the return of the bank crisis. There should be an amendment, something like an exemption allowance of 25-30 thousand euros ($32,000 to $39,000) so that small-time bank clients are not being punished."
Russian President Vladimir Putin on Monday called the proposed levy "unfair, unprofessional and dangerous." Russian banks and corporations have billions of dollars in Cypriot banks.
Cypriot media say it is unlikely lawmakers will agree to the terms set in the bailout.
President Nicos Anastasiades said in a televised address to the nation Sunday if parliament does not approve the levy, Cyprus faces bankruptcy and the possible exit of Cyprus from the eurozone.
Stocks in Asia plunged 2 percent or more, with European and U.S. indexes falling by smaller amounts.
Meanwhile, Cyprus moved to revamp terms of the bank deposit tax that its international lenders imposed as part of a $13 billion bailout to keep the Mediterranean island nation from going bankrupt.
Cypriot officials were working with the lenders to cut or eliminate the tax on small investors, while raising it on those with bigger accounts. Cyprus's parliament, for the second day in a row, postponed a vote on a new plan and rescheduled it for Tuesday.
Cypriot banks were closed on Monday for a holiday and officials said they would remain closed until Thursday, to prevent a run on accounts.
Cypriots were angered by the deposit tax, with one domestic worker saying it is unacceptable.
"We cleaning ladies spend our entire days trying to earn some money in order to feed our children, and now they are saying they are going to take it from us? Its unacceptable! No! Not a single haircut, we will not accept any kind of haircut!''
Under bailout terms set Saturday by Cyprus's eurozone neighbors and the International Monetary Fund, a one-time tax of 9.9 percent would be imposed on deposits of $131,000 and up, while deposits under $131,000 would be taxed at 6.75 percent. The bank levy would hit everyone with money in Cypriot banks, including foreign nationals.
European officials said they would support cutting the levy on small depositors, but only if the revised tax still raised the same $7.6 billion agreed to in the overall rescue plan.
The Cypriot economy accounts for only a very small fraction of the eurozone's economic fortunes. But none of the previous bailouts for Greece, Portugal, Ireland and the Spanish banking system has taxed depositors.
Analyst Robert Halver of the Baader Bank said the fear is that depositors throughout the eurozone might view the Cyprus experience as reason to start withdrawing their funds from bank accounts. Such a run on banks could create a new crisis for European governments, now in the third year of their debt crisis.
"What has been done in Cyprus is an experiment. If the population has to, in the form of their savings, contribute to rectify the mistakes that have been made in Cyprus, then there is a danger that in other countries people will decide, at the breakfast table, to withdraw their money. If money is withdrawn on a great scale, if we have a bank run, then we see the return of the bank crisis. There should be an amendment, something like an exemption allowance of 25-30 thousand euros ($32,000 to $39,000) so that small-time bank clients are not being punished."
Russian President Vladimir Putin on Monday called the proposed levy "unfair, unprofessional and dangerous." Russian banks and corporations have billions of dollars in Cypriot banks.
Cypriot media say it is unlikely lawmakers will agree to the terms set in the bailout.
President Nicos Anastasiades said in a televised address to the nation Sunday if parliament does not approve the levy, Cyprus faces bankruptcy and the possible exit of Cyprus from the eurozone.