In the worst case scenario, the new levy could cause a run on banks in countries like Greece.
But that may not be enough to stop a Europe-wide run on banks by depositors who fear a currency break-up.
The fear was this tax trend could cause a run on banks, with wealthy account holders pulling their non-insurable cash out and putting it in safer banks in northern Europe or elsewhere.
Economists have warned that a run on banks would result if Greek depositors fear their savings would be wiped out in the event Greece exits the euro zone and begins using a different currency.
Mr Buiter acknowledges that Britain has access to currency swap lines from the world's biggest central banks, which would help it prevent a run on the banks.
They are currently sitting back and watching a damaging run on the banks unfold.
He tells us his suppliers there are worried about a run on the banks.
Branches were replenished with cash overnight and police were deployed amid fears of a run on the banks.
But it seems the damage has already been done: a run on the banks now looking increasingly likely.
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Both the government of President Eduardo Duhalde and the IMF want to prevent a run on the banks.
The biggest threat is that some event sparks a run on the banks - in either Greece or Spain.
These demands amounted to a virtual run on the banks and helped to bring down Bear Stearns and Lehman Brothers.
Some observers had predicted that efforts to renegotiate the bailout could lead to a run on Greek banks and deeper misery.
It is the very real threat of another run on big banks and money market funds, as took place in 2008.
Transactions: There would be controls on bank transactions to stop a run on the banks with money being taken out of Cyprus.
Last week, Europeans essentially saw a run on their banks as individuals and businesses sold the Euro and bought the U.S. Dollar.
Outside the euro, the Greek people have been told, there would be a run on the banks, exchange controls, bankruptcy and hyperinflation.
Some economists even fear a run on Vietnamese banks in the absence of robust measures to shore up the country's financial sector.
As leaders prepared to tax bank deposits in order to prevent a default, citizens panicked and caused a run on the banks.
There are fears that a Greek exit could trigger a run on the banks - not only there but in other Eurozone countries.
Strict capital controls - unprecedented for the eurozone - are in force in Cyprus, limiting cash withdrawals to prevent a run on the banks.
Britain is far less exposed to a run on its banks by foreign depositors than Iceland was, says Ben Broadbent, an economist at Goldman Sachs.
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Many fear a run on the banks, causing the country to be forced out of the euro - heralding in turn the return of the drachma.
Critics had feared that efforts to renegotiate the bailout would set up a confrontation that could lead to a run on Greek banks and deeper misery.
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And the scariest thing, I think, I've seen yet, was what happened to IndyMac in the summer, in July, when you had a run on the banks.
The measure sparked fury in the Cypriot parliament, prompting Cypriots to withdraw money from bank cash machines and raising fears of a broader run on ailing banks.
Over the past few months, we have observed, through the borrowings at the ECB, a growing silent run on European banks in the at-risk countries (Spain, Italy).
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