Cyprus bailout crisis sparks run on banks
Banks on the run with financial shockwaves spread across European Union after depositors are forced to bail out banks whose assets became too big for Cypriot economy

The European Union finally decided to force Cyprus' savers into a bailout after the tiny Mediterranean island's banks grew so large that they dwarfed its economy - a situation alarmingly similar to Iceland five years ago.

The similar imbalance in Iceland had proved to be a harbinger for the European financial crisis. Back then, Iceland's banks were no longer able to finance a debt 12 times the size of GDP and Reykjavik stepped in to seize control.
After Cyprus' banks lost €4.5 billion on Greek sovereign debt and failed to meet European capital requirements, the Cypriot government was compelled to take action itself.
Over the weekend, Cyprus announce a €5.8 billion bailout plan, including, most controversially, a big charge on small deposits that were supposed to be guaranteed by its deposit insurance scheme.
"The banks grew as they amassed funds from wealthy foreigners and now that size is too much for the country to handle on its own," said Philipp Haessler, a European banks analyst at Equinet in Frankfurt. "Cyprus is being made an example of."
