Europe braced for renewed turmoil as outrage in Cyprus over an unprecedented levy on bank deposits threatened to derail the nation's bailout. European shares and the euro tumbled.
Cypriot President Nicos Anastasiades, who bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.6 billion) by taking a piece of every bank account in Cyprus, appealed to lawmakers in Nicosia to ratify the levy today. The vote was delayed from yesterday over the opposition of the European Central Bank amid talks to restructure the tax.
While Cyprus accounts for less than half a percent of the 17-nation euro economy, the raid on bank accounts risks triggering new convulsions in the financial crisis that began in 2009 in Greece. Moody's Investors Service said that the move is a significant step toward limiting support for bank creditors across Europe and shows that policy makers will risk financial-market disruptions to avoid sovereign defaults.
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