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Cyprus passes bills for EU bailout; Greece to take over bank branches

Louisa Gouliamaki / AFP - Getty Images

Greek leftists demonstrate on Mar. 22, 2013 in Athens in support of Cypriots with a banner, reading: "common struggle of the people of Greece and Cyprus against the governments, memorandum, euro and EU

Lawmakers in Cyprus approved three bills late Friday aimed at securing a bailout for its troubled banks from the European Union and averting a financial meltdown.

The legislation includes one bill that allows the government to divide the wobbling lenders into good and bad banks -- a law that would likely to be applied first to Cyprus Popular Bank. The goal is to restructure without hurting small depositors.

A second law puts in place restrictions on financial transactions in times of crisis and a third sets up a "solidarity fund."

The country is expected to adopt more legislation in an effort to raise the 5.8 billion euros Cyprus needs to get an EU bailout.

Thanassis Stavrakis / AP

A man uses an ATM of Piraeus Bank in central Athens, Friday, March 22, 2013. Greece's Piraeus Bank said it has been chosen to buy two Cypriot banks' operations in Greece.

Among the other bills being brought forward is one that imposes a tax of less than 1 percent on all bank deposits, Averof Neophytou, deputy head of the governing DISY party told The Associated Press.

Earlier Friday a Greek Bank was chosen to take over the local branches of Cyprus's troubled banks in a bid to shelter Greek customers of those institutions and help Cyprus shrink its bloated banking sector.

Piraeus Bank of Greece was to take over the operations in a deal that a source close to the matter said involved the transfer of 17 billion euros of loans and 14 billion euros of deposits, Reuters reported.

The terms of the deal were not expected to emerge until Sunday, and would need to be approved by European competition authorities, according to Greece's bank bailout fund.

Worried the crisis could trigger panic among Greek depositors, Greek officials had been working to agree on a deal since early this week. They were forced to put the plans on hold after Cyprus voted down a proposed bank levy included in its bailout agreement.

"We have responded to the necessity of utterly safeguarding the depositors of the Cypriot banks in Greece," Piraeus Chairman Michalis Sallas said.

There was no immediate announcement about the fate of the Greek operations of Cyprus's third-biggest bank, Hellenic Bank, which are much smaller than those of the top two.

"It's unclear if the deal will include Hellenic Bank. Either way, it won't move the needle much," a Greek bank bailout fund official told Reuters.

Cypriot banks hold 8 percent of Greek banking deposits and 10 percent of loans. They have about 300 branches in Greece.

Reuters and The Associated Press contributed to this report.