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In Cyprus, Banking Crisis Prompts Government to Tax Citizen Savings

March 18, 2013 at 12:00 AM EST
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JUDY WOODRUFF: The day’s biggest economic story came from Europe, where old worries about debt, bailouts, and public anger found new life again. European markets were rattled today by events that occurred on the tiny Mediterranean island nation of Cyprus. The island is part of the European Union, and plans for the government to seize individual bank deposits set off outrage there.

It also prompted worries about whether other nations could follow suit in time. As the day wore on, concerns about the region’s debt crisis dragged on U.S. markets as well. The Dow Jones industrial average fell 62 points to finish the day at 14,452. The Nasdaq lost more than 11 points to close above 3,237.

We begin our coverage with this report from Emma Murphy of Independent Television News in Nicosia.

EMMA MURPHY, Independent Television News: They held their hands in protest and not inconsiderable despair. These of Cyprus say they are furious with their government and other Eurozone leaders. They are the people who are having to carry the weight of the E.U. bailout.

The banks will get 10 billion Euros to keep them afloat, but Cyprus has to find 5.8 billion more. It would come through a levy, meaning these people will lose between six percent and nine percent of their savings.

MAN: It’s like people putting your hands in your pockets and receiving something. It’s outright theft. And this is something that should not have happened in Cyprus.

EMMA MURPHY: These are the people who are really suffering. They saved their money. They put it in the bank. And they believed that it would be safe. Then they woke up to find that their balances had gone down considerably and they couldn’t even get access to cash, little wonder after promises from their president that their money would be protected, they’re now so angry.

SUE HALL, Business Owner: We do probably about 50 weddings a year.

EMMA MURPHY: Sue Hall moved to Cyprus to run a wedding company.

SUE HALL: My big concern is the business, because most of the money in my business account actually belongs to brides that have paid for weddings here. So, you know, what do I do? Do I ask them for more money or do I have to carry the loss?

EMMA MURPHY: Banks are closed until Thursday. And there’s a limited amount of money left in the cash points. The Cypriot government has to get parliament to agree the deal or the bailout fails. They’re not confident.

HARRIS GEORGIADES, Cyprus Ministry of Labor and Social Insurance: We shall face a total collapse of the banking system and of the whole Cyprus economy.

EMMA MURPHY: Such talk may well be brinksmanship. If not, these people and many more across Europe face futures which will be forever changed by the events of the past three days.