Katia Christodoulou / EPA
A woman unsuccessfully attempts to withdraw from a Cypriot bank ATM in Greece on Sunday.
By Alastair Jamieson, Staff writer, NBC News
LONDON ? Financial markets in Europe fell sharply in early trading Monday following the surprise announcement of a levy on bank accounts in Cyprus as part of a financial bailout.
London's FTSE 100, Frankfurt's DAX and Paris's CAC-40 were down 1.4, 1.6 and 2 percent respectively as of 4:30 a.m. ET as traders' screens showed a sea of red, CNBC reported.
Cypriots and foreign investors emptied ATMs following Saturday?s unexpected 10 billion euro ($13 billion) deal under which savers must surrender up to 10 percent of bank deposits. Banks in Cyprus were due to remain closed because of a public holiday Monday.
Adding to the uncertainty, Greek media reports on Monday suggested Russian energy giant Gazprom might offer Cyprus an alternative to the bailout.?
Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors, and Moscow has already given the Mediterranean country a sovereign loan to ease its financial crisis.
Russia?s president Vladimir Putin criticized the bailout as ?unfair, unprofessional and dangerous,? Reuters said, citing a spokesman.
The Economist also criticized the deal, describing it as ?unfair, short-sighted and self-defeating.?
The parliament in Cyprus was due to vote Monday on the euro zone package, which was agreed by the European Union and the International Monetary Fund and appeared to contradict assurances that last year?s expensive bailout of Greece was a one-off.
The European market dive echoed earlier falls in Asia. The euro itself fell below $1.29 to its lowest level in three months, CNBC reported.
Markets in Italy and Spain ? countries regarded at the highest risk of further financial crisis ? saw some of the biggest share falls, particularly in the banking sector.
"It's a Cyprus shock,? Ken Hasegawa, a commodity sales manager at Newedge in Tokyo, told Reuters.
The bailout caused dismay in Cyprus. ?They shouldn?t touch the deposits. ?They?re just killing the people,? 58-year-old Miltiades Papamiltiades, an unemployed former construction worker, told the English-language ?Cyprus Mail news site. ?No-one will ever deposit money again into the banks on the island. It is the end of our economy,? he added.
Of the $90 billion deposits held in Cyprus banks, a little under half is held by non-residents, mostly Russian.
Alex Spilius, of the U.K.?s Daily Telegraph, reported that Cyprus in recent years had become, like off-shore haven Monaco, ?something of a sunny place for shady people.? He wrote:
?By 2011, the IMF reported that the assets of Cypriot banks were equivalent to 835 per cent of annual national income. Some of that was down to investment by foreign-owned banks, but most was Cypriot.
This imbalance might have been sustainable had the country?s two largest banks not made loans to the Greek government worth 160 per cent of Cypriot GDP. It has never been clear whether that risk was taken out of ethnic solidarity, or from a presumption that the Greeks knew what they were doing. But in any event, it was disastrous.?
Related:
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'The country is on its knees': Ireland grapples with economic collapse
Greek tragedy: Economic crisis sparks brain drain
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This story was originally published on Mon Mar 18, 2013 6:32 AM EDT
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