As part of a plan to rescue Cypriot banks, deposit-holders in those banks will be subjected to an immediate expropriation of a certain percentage of their savings accounts, the exact amount of which is still being worked out. (Initially, it was 6.5 percent on balances below 100,000 euros and 9.9 percent on those above 100,000.) The government is framing this haircut on deposits as a "tax."
Many market observers are worried about the precedent this sets. After all, what's to stop EU leaders from deciding to do the same thing the next time a banking system in a bigger euro member state needs a bailout?