It looks like a deal, that scraps the plan to tax bank deposits, has been reached between Cyprus and the EU. One of Cyprus's large banks (Laiki) would be wound down. Senior bondholders will take a loss and depositors with over 100,000 thousand euros would take a loss.
Cyprus banks have been used to evade taxes, and to provide secrecy for many wealthy members of the former Soviet Union. It looks like they will have to find a less convenient place to hide their money.
Paul Krugman argues that the crisis in Cyprus may lead other nations to place limits on the free flow of capital that has been responsible for most of the financial crises that we have experienced in recent years.
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