Depositors in Cyprus will have a ‘tax levied’ against them, is a polite way of saying they will have their money seized. And if you want to take it further and display anger, another word that could be used is stolen. What we are seeing from Cyprus and the E.U. are further examples of euphemisms to try to calm the crowds. Lets remember that Greece did not ‘default’ on their bonds either, what was experienced was merely a ‘haircut’ according to the European Union and their officials. Investors starting the new week in Asia have not exactly been swayed by the polite words coming from E.U. this morning, equities are trading sharply lower. The EUR has taken it on the chin and is being pressured in forex.

Gold as of this early writing is near 1596.00 USD and should be watched carefully as news develops from the European continent today. As a well practiced safe haven the precious metal may find some takers if the broad markets see widespread volatility. There will be very little economic data from Europe today. Investors will have their full attention concentrated on the situation in Cyprus. The Cypriot government says that it will try to approve the E.U. mandates in order to receive its bailout quickly, but as of yet the Cyprus government has not acted. If the island nation continues to wait investors could become spooked.

While Cyprus is a small entity in the greater context of the financial crisis that is harming the E.U., the likely seizure of deposits from bank accounts will be viewed with concern among depositors within other fragile domains. Banks with weaker bottom lines in Spain and Italy may find themselves dealing with nervous questions from clients in the coming days.

The problem is that the tax that is supposedly going to be brought upon Cyprus depositors will only add to the belief that politicians and officials cannot back up all of their rose-colored rhetoric and have proven again that they are not to be trusted. For all of the talk about Europe emerging from its recession sometime this coming summer, the E.U. continues to show that it truly doesn’t want to be honest about the magnitude of their problems and they are trying to put a small bandage on a large wound. Penalizing depositors will only add to the perception that the financial crisis in the E.U. is much worse than what the public is being told. And if you have money in a troubled financial institution isn’t it better to act sooner rather than later to preserve your money?

Data from the U.S. will also be scant today, and it should be clear that Wall Street which has seen its major indexes climb to rather lofty values is likely to face a major challenge. Traders who do not have positions, should think twice about swimming in these potential storm waters. In the meantime, investors can count on the E.U. to use polite words as they try to assure everyone that all will be fine, but investors should also remember their grandparents words, “better safe than sorry”.