Outside, the A.T.M. coughed up 50-euro bills, as few as two or four at a time — a relief, since banks will remain closed through Wednesday. Yet it was still not enough to assuage fears.
“How can I trust any bank in the euro zone after this decision?” asked Andreas Andreou, 26, an employee at a trading company.
“I’m lifting all my deposits as soon as the banks open. I’d rather put the money in my mattress.”
In this windswept capital, and in the halls of power elsewhere in Europe, much of the day was given over to cross-border arguing and a public reluctance for anyone to take responsibility — some might say blame — for a decision that suddenly seemed like it might not be such a great idea, after all.
As a plan to tax deposits in exchange for a 10 billion euro financial lifeline for this troubled nation frayed nerves, it quickly set off tremors far beyond Cyprus’s shores. Stock markets around the world fell Monday — though American markets remained calm — amid the stark realization that Europe’s policy makers had made a significant departure from past efforts to keep the euro zone together.
Economists said the Cyprus plan set a worrisome precedent that could backfire. The plan “risks setting off a bank run and contagion,” said Michael T. Darda, chief economist at MKM Partners.
For the first time since the onset of the sovereign debt crisis in Europe and the bailouts of Greece, Portugal and Ireland, ordinary bank depositors — including those with insured accounts — were being called on to bear part of the cost, to the tune of 5.8 billion euros, about $7.5 million, of the 10 billion euro package.
The plan also would wipe out so-called junior bondholders in Cypriot banks, who would give up 1.4 billion euros in holdings. Only senior bondholders, who have paid a premium to be first in line for repayment of their investments, would be fully protected.
Under the terms of Cyprus’s bailout, the government must raise 5.8 billion euros by levying a one-time tax of 9.9 percent on depositors with balances of more than 100,000 euros, or $129,500. Those with balances below that threshold would pay 6.75 percent, an asset tax that would still hit pensioners and the lowest-income earners hard.
Cyprus’s president, Nicos Anastasiades, accused European Union leaders of using “blackmail” to get him to agree, and sought Monday to compel policy makers in Brussels to soften the terms.
As lawyers in Cyprus questioned the legality of both taxing deposits that are supposed to be insured up to 100,000 euros, and confiscating sums above that, Mr. Anastasiades postponed a parliamentary vote on the package until Tuesday, as signs emerged that lawmakers might not approve.
In Brussels, the club of 17 euro zone finance ministers that had signed the bailout plan for Cyprus held an emergency conference call Monday evening and tiptoed back from terms of the arrangement, by agreeing to consider a new deal that could lighten the burden for less well-to-do Cypriots.
In a statement, they said small depositors “should be treated differently from large depositors,” and said they were open to modifying the tax on those with less than 100,000 euros. It also appeared from comments made by officials that the I.M.F. was leaning that way as well.
But Jeroen Dijsselbloem, the Dutch finance minister who serves as the president of the Eurogroup, suggested that any new arrangement still would need to deliver 5.8 billion euros.
The brinkmanship followed a protest of about 800 people gathered in front of the presidential palace, shouting angrily at Mr. Anastasiades and inveighing against Germany and European leaders as he entered the building to meet with his cabinet.
“Merkel, U stole our life savings,” read one banner tied to a bus stop. “EU, who is next, Spain or Italy?” read another.
Liz Alderman reported from Nicosia, Cyprus, and Landon Thomas Jr. from London. James Kanter contributed reporting from Brussels, Andrew Siddons from Washington, and Andreas Riris from Nicosia.
Article source: http://www.nytimes.com/2013/03/19/business/global/19iht-cyprus19.html?partner=rss&emc=rss