The Cypriot government during the loan negotiations at Eurogroup on Friday was essentially blackmailed. They were presented with the deposits haircut and increase in corporate tax. Our president threatened to leave the negotiations cause stealing depositor's money is unacceptable and was threatened that if not accepted the European Central Bank on Tuesday will stop providing liquidity to one of the main Cypriot banks which would lead into: the bank shutting down immediately, taking down the 2nd largest bank with it; 8000 people would instantly lose their jobs (Cyprus population is just 700k) and by the end of the week all small and medium sized companies will cease operations. The country would then default and be kicked out of the eurozone with all the consequences that it would bring.

What's the other option?

In the USA, taking 7+% of everyone's savings on short notice would initiate a civil war. Can't imagine how another alternative would be worse.