Cyprus plans to tax bank savings, people rush to ATM’s

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NICOSIA, CYPRUS – The economy is sinking. Banks are failing. The government uses tax money to bail out the financial institutions. And then the stock markets take a dive.

Sound familiar?

Well, this time the story is not made in America.

No, this time the world economy is on the brink because of Cyprus, the island nation in the eastern Mediterranean that’s quickly heading for default.

Over the weekend, the European Union agreed to a ten-billion euro rescue, that’s $13 billion in real American money.

But to get the money, Cyprus has to tax bank deposits. Naturally, this led to a run on cash machines. It also spooked investors fearing other weak euro-zone countries could end up like Cyprus. But there’s more at stake than just personal deposits.

The people behind this plan would like us to believe that a run on banks outside of Cyprus is unlikely. But it’s hard to stop panic once it starts, and a flat world makes it easier to skip across the pond and hit your friendly neighborhood bank and trust.