The news just keeps getting worse for the people that have deposits in the large banks of Cyprus.
Via McClatchy:
Depositors in Cyprus with savings of more than 100,000 euros ($128,000) could face losses of up to 60 percent, under tough conditions attached to an international bailout, Finance Minister Michalis Sarris said Saturday.
The deal would force large depositors at the country's two largest lenders - Bank of Cyprus and Laiki - to take heavy losses, while smaller deposits would be guaranteed.
A mandatory one-off tax on deposits of more than 100,000 euros in return for shares in Bank of Cyprus would bring a 37.5 percent decrease in value.
Depositors could also lose an additional 22.5 percent, Sarris told RIK state television, if it is determined that more funds are needed to save the bank.
Then of course they have implemented "capital controls":
The measures, which include a daily withdrawal limit of 300 euros, a ban on cashing checks and a 1,000-euro limit on money taken abroad, were implemented on Thursday after banks opened their doors for the first time in nearly two weeks.
It gets worse as Luxembourg leaders warn that applying the same type of bailout model as Cyprus is doing, in other countries, could lead to an exodus of investors from Europe, yet they are still considering it.
The debate over this week's "bail in" of bank account holders in Cyprus as part of the country's debt crisis bailout is continuing to simmer in Europe. In Luxembourg, Finance Minister Luc Frieden has warned that the example set in Cyprus by taxing people holding €100,000 ($129,000) or more in their accounts could drive investors out of Europe.
"This will lead to a situation in which investors invest their money outside the euro zone," he told SPIEGEL. "In this difficult situation, we need to avoid anything that will lead to instability and destroy the trust of savers."
Earlier this week, Euro Group President Jeroen Dijsselbloem sparked an enormous controversy after stating that the solution found in Cyprus could be applied throughout the euro zone in the future.
The remark triggered immediate criticism from his predecessor as head of the Euro Group, Luxembourg Prime Minister Jean-Claude Juncker. "It disturbs me when the way in which they tried to resolve the Cyprus problem is held up as a blueprint for future rescue plans," Juncker told German public broadcaster ZDF earlier this week. "It's no blueprint. We should not give the impression that future savings deposits in Europe might not be secure. We should not give the impression that investors should not keep their money in Europe. This harms Europe's entire financial center."
It is not an "impression that future savings deposits in Europe might not be secure," as Cyrpus shows, it is Europe that insisted depositors savings be taken directly from their bank accounts.
That ship has sailed.
IrishTimes:
Europe has demanded that large depositors in the country’s two largest banks — Bank of Cyprus and Laiki Bank — accept across-the-board losses in order to pay for the €16 billion bailout.
EuroNews:
He told the people of Cyprus the levy on their bank accounts was not what he wanted, but it was the only way to save the country’s economy. In a nationally televised address, the president called it the least painful choice under the circumstances before going on to accuse eurozone finance ministers of forcing Cyprus into this deal – in essence blackmailing Nicosia.
Investors all across Europe, especially large investors already understand that at Europe's whim, their money can be seized just as easily as they have forced Cyprus leaders to seize their depositors money.
The amount of damage Europe will see in terms of trust by investors, large and small, won't be fully understood and calculated for months to come.