Australia's sharemarket shed 2 per cent on Monday over investor worries on the Cyprus bailout problem. The All Ordinaries index declined 101.9 points or 1.99 per cent at 5,027.4, while the benchmark S&P/ASX200 index dipped 104.8 points or 2.05 per cent at 5,015.4.

The lower sharemarket value was the result of investors in Australia and Asia selling their stocks over fresh concerns about Europe's debt crisis expected to worsen as the Cyprus Parliament prepares to debate over the tax on bank deposits.

It was the same scenario in other key global markets as London's FTSE 100 lost 0.5 per cent to 6,458 while the Eurostoxx dropped to 273. The Dow Jones fell 0.4 per cent to 14,452 and the S&P 500 declined 0.6 per cent at 1,552.

The extension of the bank holiday to Thursday, March 21, caused longer lines at ATM as Cypriots attempt to evade paying the levy on deposits which is a condition imposed by the European Commission for a bailout. Meanwhile, the Association of Cyprus Banks asked depositors to remain calm and avoid panic.

Cyprus requested for 17 billion euros for bailout, but Eurozone leaders thumbed down the request because the size of the debt is not sustainable for the tiny nation with less than one million residents. They offered Cyprus only 10 billion euros, while the rest must be raised internally, mainly through the 6.75 per cent tax on bank deposits below 100,000 euros and 9.9 per cent for those above 100,000 euros.

The levy angered Cypriots who not only queued at cash machines but also held on Monday a protest march outside the Parliament building in Nicosia to show their anger at the tax which was not imposed on other Eurozone nations that asked for bailout assistance.

The angry Cypriots were supported by Russia since Russian companies and banks account for at least $31 billion in deposits which comprise between one-third and one-half of all the deposits in Cypriot banks.

"We should say this directly: this simply looks like the confiscation of other people's money," Russian news agencies quoted Prime Minister Dmitry Medvedev. Russian President Vladimir Putin likewise spoke against the levy.

The Cypriot Parliament postponed voting on the measure to give it time to study the proposals, explained Parliament Speaker Yiannakis Omirou.

But CMC Markets Senior Trader Tim Waterer said in a statement on Monday, "This latest issue concerning Cyprus may provide the market with some short-term pain however it is also possible that the downside reaction experienced today could be short lived. With an FOMIC statement due later this week attention may shift back to the growth story that is playing out in the US economy. This could ease some of the general anxiety which has plagued financial markets today."

RELATED STORIES