Traverse City Record-Eagle

Business

March 19, 2013

Stocks fall after Cyprus seizes private savings

LONDON (AP) — Stocks around the world and the euro fell Monday as investors fretted over the implications of a plan to seize a part of deposits in Cypriot banks to partly fund a bailout for the Mediterranean island nation.

Financial stocks bore the brunt of the selling in European stock markets, with France’s Societe Generale down 3.8 percent and Italy’s UniCredit 3.6 percent lower, as investors worried about the implications of the Cyprus bailout.

Since the European debt crisis began in late 2009, savers have been spared. But the bailout of Cyprus, agreed to on Saturday, foresees the government seizing 6.75 percent of deposits below 100,000 euro ($130,860), rising up to 9.9 percent on those above 100,000 euro. That signals a huge policy shift for the embattled eurozone.

Now investors are worried that savers will start taking their money out of banks across Europe — just like Cyprus residents did on a weekend ATM bank run.

“If European policymakers were looking for a way to undermine the public trust that underpins the foundation of any banking system they could not have done a better job,” said Michael Hewson, senior market analyst at CMC Markets.

In Europe, the FTSE 100 index of top British shares fell 0.5 percent to close at 6,457.92 while Germany’s DAX dropped 0.4 percent to 8,010.70. The CAC-40 in France dropped 0.5 percent to 3,825.47. Cyprus’ main index was closed for a public holiday and the country shut down the banks until Thursday so Parliament can vote on the bailout.

The euro was down 0.6 percent at $1.2974.

The Cypriot Parliament has to back the proposal for it to pass, and lawmakers have called it an unfair blow to small savers, since up until now deposits around the eurozone have been guaranteed up to the 100,000 euro level.

The vote was postponed for a second time with the Parliament speaker saying it will now take place Tuesday.

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