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Why did the Euro-backed tax levy on Cyprus depositors force a run from bankers?

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Question added by Michael Kamau , Management Accountant , Muthaiga Golf Club
Date Posted: 2013/04/20
Rashid Koja
by Rashid Koja , Tutor , Free Lance Tutoring

In the initial stages of the Cypriot Bank Bailout, the EU was going to impose a tax on all deposits of 100, 000 Euros or more without any Capital controls in Cyprus.
So of course that is going to cause a run on the bank, but when the EU and Cyprus saw what was happening they modified the loan package to put less pressure on depositors, and Cyprus imposed Capital controls to keep money in the country.
In the end, the banking crisis in Cyprus was contained.

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