Over the weekend, Cyprus agreed to a package of measures in order to receive a €10 billion rescue package. Most significantly, they agreed to a tax of 6.75 percent on all bank deposits under €100,000 while accounts over that threshold would be hit with a 9.9 per cent levy.
Following broad unrest, and without the votes in Parliament to pass the tax, the government is today considering revising the tax to put more of the burden on the large, uninsured deposits. The Cyprus parliament has called an emergency session, and a bank holiday remains in effect. Euro markets are down 1 to 2.5 percent today.
The Cypriot government, and European leaders more generally, appear to have badly misread public opinion.
Russia, whose involvement is critical to the deal, called the tax "unfair, unprofessional and dangerous." A decision to reduce the tax on small deposits and put more of the burden on large (mostly Russian) deposits likely will not be well received in Moscow.
This should be an interesting week.