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Europe markets follow Asia's down after Cyprus bailout deal Europe markets follow Asia's down after Cyprus bailout deal
(35 minutes later)
European markets have followed Asian shares downward on fears that the plan to bailout Cyprus could trigger an escalation of the eurozone debt crisis.European markets have followed Asian shares downward on fears that the plan to bailout Cyprus could trigger an escalation of the eurozone debt crisis.
The EU and IMF want all bank customers to pay a levy in return for a bailout worth 10bn euros ($13bn; £8.6bn).The EU and IMF want all bank customers to pay a levy in return for a bailout worth 10bn euros ($13bn; £8.6bn).
London's 100 share index is 1% lower, while France and Italy are down 2%.London's 100 share index is 1% lower, while France and Italy are down 2%.
The euro was also affected. Against both the pound and the dollar it lost about 1%, leaving it at 85.7pence and $1.293 repectively. The euro was also affected. Against both the pound and the dollar it lost about 1%, leaving it at 85.7pence and $1.293 respectively.
Earlier, Japan's Nikkei 225 index fell 2.7%, while Hong Kong's Hang Seng and Australia's ASX 200 dipped 2%.Earlier, Japan's Nikkei 225 index fell 2.7%, while Hong Kong's Hang Seng and Australia's ASX 200 dipped 2%.
Banking shares were among the hardest-hit, with Italy's UniCredit losing almost 5%, Intesa Sanpaolo down 4%. Banco Popolare, which announced a bigger-than-expected annual loss on Friday after the market closed, down almost 5%.Banking shares were among the hardest-hit, with Italy's UniCredit losing almost 5%, Intesa Sanpaolo down 4%. Banco Popolare, which announced a bigger-than-expected annual loss on Friday after the market closed, down almost 5%.
France's BNP Paribas and Credit Agricole were both down more than 3%.France's BNP Paribas and Credit Agricole were both down more than 3%.
In Germany, Deutsche Bank was down 3.5% while Commerzbank was 1.5% lower.In Germany, Deutsche Bank was down 3.5% while Commerzbank was 1.5% lower.
'Confusion''Confusion'
Analysts said that investors were divided about whether the developments in Cyprus would affect other bigger eurozone economies, which may also need bailout funds in the future. Developments in Cyprus have unsettled some investors and depositors in other, bigger, eurozone economies.
Some fear that, if approved, the plan may set a precedent for those countries. "The unprecedented move is an extreme measure and in our view, it will spread some panic... we cannot rule out some capital outflows," said Annalisa Piazza of Newedge Strategy.
"There will certainly be confusion in Cyprus, and investors looking just at headlines may fret about its case becoming a model," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. She suggests that it could drive up the cost of borrowing for some other weaker, eurozone economies in the short-term.
David Cumming of Standard Life said investors should not be unsettled by the move: "I don't think it will have a lasting impact, I think it's an excuse for a correction after a strong run-up," he told BBC News. Other analysts, however, suggest the affects on other eurozone countries will be limited.
"I doubt that the case in Cyprus will trigger contagion risks across the eurozone, as the size of the country is too small and its industrial structure is very different from other euro zone members, in that Cyprus is dependent on just tourism and the financials sector," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
David Cumming of Standard Life told BBC News: "I don't think it will have a lasting impact, I think it's an excuse for a correction after a strong run-up.".
He said people trusted the EU's mechanisms for maintaining stability in the eurozone: "I don't see a destabilisation of bank deposits across Europe. I don't see any impact for more than a few days in the market."He said people trusted the EU's mechanisms for maintaining stability in the eurozone: "I don't see a destabilisation of bank deposits across Europe. I don't see any impact for more than a few days in the market."
Analysts said the fresh concerns over the fate of some of the eurozone weaker members, triggered by the developments in Cyprus, had resulted in investors looking to ditch relatively riskier assets.
"The week has started with a clear rise in risk aversion, following the surprise weekend decision in Brussels to slug all depositors in Cypriot banks with a levy in order to approve 10bn-euro bailout funds," said Sean Callow, a senior currency strategist at Westpac.
DippingDipping
This is the first time the 17-nation eurozone has sanctioned dipping into people's savings to finance a bailout.This is the first time the 17-nation eurozone has sanctioned dipping into people's savings to finance a bailout.
The plan is yet to be finalised, but the news of the deal caused a rush to the cash machines in Cyprus as people tried to withdraw money.The plan is yet to be finalised, but the news of the deal caused a rush to the cash machines in Cyprus as people tried to withdraw money.
Under the levy, bank customers with less than 100,000 euros would have to pay 6.75%, while those with more than 100,000 euros would pay 9.9%.Under the levy, bank customers with less than 100,000 euros would have to pay 6.75%, while those with more than 100,000 euros would pay 9.9%.
However, depositors in Cypriot banks outside the country, including in Greece, are unaffected by the levy.However, depositors in Cypriot banks outside the country, including in Greece, are unaffected by the levy.
But the plan is yet to be finalised and Cyprus's leaders have said they want to ensure protection for small investors.But the plan is yet to be finalised and Cyprus's leaders have said they want to ensure protection for small investors.
Meanwhile, an emergency session of the Cypriot parliament has been postponed until later on Monday.Meanwhile, an emergency session of the Cypriot parliament has been postponed until later on Monday.
Also, Germany must approve the plan, but is not due to vote until next month.Also, Germany must approve the plan, but is not due to vote until next month.
Following eurozone finance ministers' negotiations last week, Cyprus became the fifth euro-area country to get a bailout to save its banks, which suffered significant losses because of their exposure to Greek debt.Following eurozone finance ministers' negotiations last week, Cyprus became the fifth euro-area country to get a bailout to save its banks, which suffered significant losses because of their exposure to Greek debt.