World Markets Roiled as Cyprus Bailout Deal Stalls

Cyprus, with a population just over 1 million, is posing big challenges to global financial markets. The government failed to pass a €10-billion package that would have taxed bank deposits to pay for the rescue – 6.75 percent for deposits less than €100,000, 9.9 percent for those with more. “None of the euro zone’s sovereign and bank bailouts, from Ireland to Greece, has insisted that bank depositors finance part of the bailout bill,” explains Eric Reguly for the Globe and Mail in Canada. Regulators and government leaders do not want to be viewed as imposing wage and pension cuts to rescue an offshore banking center with many foreign deposits. Russians who have used Cyprus to hold their money offshore were particularly upset. The plan backtracks on protections for bank deposits worth up to €100,000. The plan triggered a rush of withdrawals, protests and global concern that the eurozone difficulties will continue to rough up the global economy. Failure to quickly resolve eurozone debt problems raises interest rates in Europe, imposing new costs on all. – YaleGlobal