Asian and European stock markets have shown clear signs of nervousness at the start of the new week. A tax on depositors' savings in Cyprus as agreed by international lenders on the weekend is causing alarm.
Asian Pacific stock markets fell Monday amid widespread worries over a Cyprus bailout package seen to escalate the eurozone crisis.
A tax on depositors' savings in Cyprus as agreed among international lenders and the government in Nicosia rattled investors who feared the move, if passed by parliament, could set a precedent for future euro area bailouts.
Japan's benchmark Nikkei 225 Stock Average lost 2.71 percent, while the broader-based Topix index was down 2.22 percent. Hong Kong's Hang Seng index dipped 2.15 percent, with Australia's S&P/ASX 200 also dropping by more than 2 percent.
European stocks also pointed downwards sharply in early Monday trading. London's FTSEurofirst 300 was down 1.2 percent minutes after trading started, with banking stocks easing by 2.4 percent. Germany's blue-chip DAX 30 was down about 1.5 percent within minutes.
"Despite reassurances from Brussels that Cyprus is a special case and that indiscriminate levies won't be a common policy tool, depositors across Europe are fearing that a new precedent has been set for other debt-laden eurozone countries," Capital Spreads dealer Jonathan Sudaria said in a note.
The controversial tax is designed to help bolster the ailing banking sector in Cyprus and strengthen public finances. It is also a prerequisite for the nation to receive a 10 billion euro ($13 billion) bailout from international lenders. Cypriot President Nicos Anastasiades warned that without a rescue package the financial sector would collapse and plunge Cyprus into bankruptcy.