The tiny island nation of Cyprus is in crisis. The President said a bank levy on private bank accounts was the "least painful" option to keep the country afloat. As a condition for a 10 billion euro bailout, fellow Eurozone countries and world-wide creditors imposed a levy on all bank deposits.
It will hit the wealthy, who can afford it, including many Russians who have put vast sums into Cyprus banks in recent years, to those who can't afford it - retirees and ordinary workers. Those with more than 100,000 euros in the bank will pay a 9.9 per cent levy and those with less, will pay 6.75 per cent.
Wealthy nations like Germany and The Netherlands have decided that from now on, when a bank or country fails, it will be bond investors and bank deposit holders who will pick up a big part of the bill.
The European Central Bank said that the bailout will go ahead on the condition that the bill goes through Sunday or Monday, before financial markets open in Europe. A bank holiday was declared on Monday to stop a run on the banks and now they will remain closed on Tuesday and possibly even Wednesday.
It's likely there will be a run on all European banks as the threat of governments taking private savings by force becomes a reality.
"Why should I leave all my money in Cyprus?" one investment banker said yesterday. "I have already instructed my bank to send my entire savings to London when the banks open on Tuesday. A precedent has been set - what is to stop them doing this again?"