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."

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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.

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.

By Robert Windrem and Jim Miklaszewski
NBC News

National security officials told NBC News that the continuing cyber attacks this week that slowed the websites of JPMorgan Chase and Bank of America are being carried out by the government of Iran. One of those sources said the claim by hackers that the attacks were prompted by the online video mocking the Prophet Muhammad is just a cover story.

A group of purported hackers in the Middle East has claimed credit for problems at the websites of both banks, citing the online video mocking the founder of Islam. One security source called that statement "a cover" for the Iranian government's operations.

The attack is described by one source, a former U.S. official familiar with the attacks, as being "significant and ongoing" and looking to cause "functional and significant damage." Also, one source suggested the attacks were in response to U.S. sanctions on Iranian banks.

The consumer banking website of Bank of America was unavailable to some customers on Tuesday, and JPMorgan Chase on Wednesday had the same problems, which multiple sources linked to a denial-of-service attack, in which a website is bogged down by a large number of requests. A Chase spokesman said Wednesday that the consumer site was intermittently unavailable to some customers, but did not acknowledge then that there was an attack. On Thursday, Chase said slowness continued but was resolved by late afternoon Eastern Time. Bank of America acknowledged on Tuesday that its site had experienced slowness, but would not say what caused it.

Senior U.S. officials acknowledge that Iranian attacks have been the subject of intense interest by U.S. intelligence for several weeks. Last week, the Joint Chiefs of Staff's Intelligence Directorate, known as J-2, confirmed continuing Iranian cyber attacks against U.S. financial institutions in a report described as "highly classified." The report was posted on internal classified U.S. government sites last Friday, September 14.

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Because of the level of classification, the officials refused to provide or confirm any specifics on these attacks. However, one official noted that Iran's uranium enrichment program had been the target of the STUXNET worm in 2010. The worm was reportedly developed by the U.S. and Israel. "The Iranians are very familiar with the environment,” quipped the official.

 

A conservative website, FreeBeacon.com, initially reported on the Pentagon analysis, quoting it as saying,  “Iran’s cyber aggression should be viewed as a component, alongside efforts like support for terrorism, to the larger covert war Tehran is waging against the west.” U.S officials did not deny the FreeBeacon report when queried by NBC News.

A financial services industry group,  the Financial Services Information Sharing and Analysis Center, warned U.S. banks, brokerages and insurers late Wednesday to be on heightened alert for cyber attacks. FS-ISAC also raised its raised the cyber threat level to "high" from "elevated" in an advisory to members, citing "recent credible intelligence regarding the potential" for cyber attacks as its reason for the move.

The former head of cyber-security for the White House testified Thursday that “we were waiting for something like this from Iran.”  Frank Cilluffo, who served as Special Assistant to the President for Homeland Security under President George W. Bush, is currently an associate vice president at George Washington University and heads the Homeland Security Policy Institute. Cilluffo testified in a previously scheduled appearance before the U.S. House of Representatives’ Committee on Homeland Security, saying “the government of Iran and its terrorist proxies are serious concerns in the cyber context. What Iran may lack in capability, it makes up for in intent.  They do not need highly sophisticated capabilities—just intent and cash—as there exists an arms bazaar of cyber weapons, allowing Iran to buy or rent the tools they need or seek.”

The statement by the purported Muslim hackers, posted on Tuesday on Pastebin, an online bulletin board, reads in full: "In the name of Allah the companionate the merciful. My soul is devoted to you Dear Prophet of Allah. Dear Muslim youths, Muslims Nations and are noblemen. When Arab nations rose against their corrupt regimes (those who support Zionist regime) at the other hand when, Crucify infidels are terrified and they are no more supporting human rights. United States of America with the help of Zionist Regime made a Sacrilegious movie insulting all the religions not only Islam. All the Muslims worldwide must unify and Stand against the action, Muslims must do whatever is necessary to stop spreading this movie. We will attack them for this insult with all we have. All the Muslim youths who are active in the Cyber world will attack to American and Zionist Web bases as much as needed such that they say that they are sorry about that insult. We, Cyber fighters of Izz ad-din Al qassam will attack the Bank of America and New York Stock Exchange for the first step. These Targets are properties of American-Zionist Capitalists. This attack will be started today at 2 pm. GMT. This attack will continue till the Erasing of that nasty movie. Beware this attack can vary in type. Down with modern infidels. Allah is the Greatest. Allah is the Greatest."

There was no report of an attack on the New York Stock Exchange.

Also on Thursday, the U.S. disclosed that it has  bought $70,000 worth of air time on seven Pakistani television channels to air an ad which shows President Barack Obama and Secretary of State Hillary Clinton denouncing the anti-Islamic video. In the ad, President Obama says, "Since our founding the United States has been a nation that respects all faiths. We reject all efforts to denigrate religious beliefs of others." Clinton appears after Obama and says, "Let me state very clearly that the United States has absolutely nothing to do with this video. We absolutely reject its contents. America's commitment to religious tolerance goes back to the very beginning of our nation."

Pakistan was added Wednesday to the State Department's list of countries to which Americans should avoid travel, joining Lebanon and Tunisia, following protests across the Middle East and North Africa and the attack on the U.S. consulate in Benghazi, Libya, in which American Ambassador Chris Stevens was killed. 

Robert Windrem is a senior investigative correspondent for NBC News. Jim  Miklaszewski is the chief Pentagon correspondent for NBC News. Patti Domm, executive news editor at CNBC and CNBC.com, contributed to this report.

Analysis: 'Manufactured outrage' behind Middle East protests

 

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TERRASSA, Spain -- Ana Valderrama and Tony Cortes do not look like squatters.

The suburban apartment they've illegally occupied since December is free of clutter. Its stone floors shine while two poster-sized pictures of daughters Jennifer, seven, and Ariadna, 11, hang on gleaming white walls.

Twelve months ago, life was very different.

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Valderrama, 36, and Cortes, 38, had both been out of work for more than two years. Unable to maintain payments on their 102,000-euro (around $128,000 at today’s exchange rates) mortgage, the couple lost their home in this commuter town about 12 miles north of Barcelona.

"I was very depressed when I realized I may be on the street with my two girls," Cortes told msnbc.com. "It’s a depression the whole family feels, a sort of Chinese torture."

Desperate to ensure they had a roof over their head, Valderrama, Cortes and 10 other families took possession of an empty apartment building. But life is still precarious. The family of four now lives on 641 euros ($800) a month in public assistance and they could face eviction at any time.

Destitution
While sophisticated and fun-loving Barcelona serves as the country's showcase to the world, Terrassa is among the many towns hiding Spain's shame: Despite boasting Europe's fourth-largest economy, hundreds of thousands have been forced into destitution by the country's housing crash.

Photos: Faces of Spain's economic crisis

Many Spaniards now exist on the margins of a society that just a few years ago promised them easy access to cars, holiday homes, trips abroad and regular tickets to professional soccer games.

The crisis was born out of a mighty housing and construction bubble that saw house prices triple between 1995 and 2007. They've fallen by at least a quarter since then.

'The country is on its knees': Ireland grapples with economic collapse

About one out of every four people in Spain is without a job, according to government statistics. However, the large so-called "gray economy" mitigates the effects of unemployment, the IMF says.

In 2010, court evictions hit 100,000 – four times the total in 2007. About 200 homes are repossessed every day across Spain, according to the Platform for People Affected by Mortgages (PAH) campaign group.

These repossessions continue despite a voluntary ethical code signed by many banks that is intended to delay evictions by two years in cases of families with no income. Still, an estimated 20 percent of the country’s unoccupied homes are now owned by banks, The Economist reported.

You don’t have to look very far to see the toll the crash has taken on people who have worked all their lives.  

Before the crisis Juan Antonio Pache, 67, did not think of himself as poor.

His construction business once employed nine people. He borrowed money to build a house on land he already owned, and a few years later he borrowed more to extend it.

Pache's company thrived, he said, until 2007 when he noticed a fall-off in new business. By April 2008, income had decreased "vertically," he said.

"I made proposals, proposals and proposals but no projects came," he said. He fell behind on payments to Spain's equivalent of Social Security. Soon he could not afford his mortgage payments of around 3,000 euros a month.

Now the bank has seized his house and land. He has lost his business and lives with his son in Sabadell, a city northwest of Barcelona.   

He doesn't receive a state pension, and his wife has moved in with family in another town. 

"All I've done is work. I've worked day and night on the highways. And after so much work I have no house and no pension," he said, standing very straight. "I don't know what kind of country this is."

Greek tragedy: Economic crisis sparks brain drain

With banks in a fierce competition for new customers and mortgages easy to come by, some borrowers doubtless took on too much debt during the boom years. But even as the crisis hit, politicians assured the public that all would be well.

In 2008, former Prime Minister Jose Luis Rodriguez Zapatero declared that Spain had "perhaps the most solid financial system in the world."

Infant malnutrition
The fact the crisis is taking a toll in a relatively wealthy part of Spain surprises those who work with the most vulnerable.

"We have noticed a huge increase in people asking for food assistance – around three times more than a year ago," said Ester Soto, a manager at Terrassa's Red Cross homeless shelter.

Fraying family networks and swinging cuts in social programs, as well as the worsening crisis, are the likely reasons for this growth, she said.

More startlingly, the Red Cross is also seeing evidence of infant malnutrition for the first time in decades, Soto added.

"And this is not a poor town," she said.

Spain's financial plight has taken center stage for European Union leaders who are tackling long-term plans for closer fiscal and banking union in a bid to strengthen the euro's foundations, after bailouts for Greece, Ireland and Portugal failed to end a 2-1/2-year old debt crisis.

On June 9, the European Union stepped in with the promise of a bank-bailout plan of up to 100 billion euros ($125 billion) and Spain formally requested the rescue on Monday. The original announcement failed to calm nerves as investors worried that it might not be enough and a wholesale bailout of Spain could be in the offing.

Spain to seek bailout; up to $125 billion on table

Paul De Grauwe, a prominent economist and professor at the London School of Economics, said that not only would the bailout announced in early June probably be inadequate, it was unlikely that European Union’s response would help ease the suffering of millions of Spaniards.

He also said the European Union's decision-making process, which is propelled by economic powerhouse Germany, is deeply undemocratic.

"Today it is a German politician who decides about Spain," he said. "They couldn’t care less about the Spanish unemployed. They will only care about unemployment if it is German unemployment. They will only care about youth unemployment if it is German youth unemployment."

Germany grows weary of being Europe's crutch

'I want to work'
Spanish youth unemployment stands at 50 percent, the highest in Europe. Such statistics are a fact of life for university student Marisol Martin.

"I want to work, have money, be independent and have my own place," the 19-year-old said. "I go on the Internet, send out resumes and resumes but nothing."

The only opportunities for people like her, she said, are unpaid work experience positions or poorly paid jobs in bars or restaurants.

So she is taking English classes and hopes to one day leave Spain.

"My dad’s told me and my sister that what I have to do is get out and go to England," she said.

Martin's friend Laia Moreno, 18, lives with her mother. "I would like to have my own place and my own life," she said.

"I wanted to be a teacher," she adds. But for now, that dream has died and she's trying to get a driver's license so she can deliver pizzas.

'I had to sell everything'
Life isn't much better for many immigrants, with the unemployment in these communities hovering at around 35 percent.  

Wilson Lopez left Ecuador more a decade ago in search of a better life for his wife and son. Nine years ago, he took on a mortgage of 109,000 euros, on which his wife Isabel and he made interest-only payments, Lopez said.

"I paid my mortgage loyally for nine years," the 63-year-old native of Guayaquil said during a protest organized by the PAH in Barcelona.

CSM: As Europe peers into economic chasm, Africa is rising

In 2010, Lopez lost his job as a security guard in a local hotel.

"I had to sell everything – my wife's jewelry, our television, clothes – everything," he said.

Lopez would like to hand over the apartment's keys to the bank and have done with it, he said. But he can't because most homeowners in Spain can be pursued for mortgage debt even after their properties have been repossessed.

Instead, Lopez felt forced to extend the loan for another 40 years. He pointed out wryly that he will be over 100 when it runs its course.

"The government works for the banks but it does not help the people," he said.

This sort of disillusionment has grown as people impacted by the crisis watch the government bailing out banks while imposing widespread cuts to public services.

Amid this backdrop, the Platform for People Affected by Mortgages (PAH) has sprouted branches throughout the country.

In the last six months, PAH has suspended or delayed dozens of evictions by protesting outside foreclosed homes and helping people negotiate with their banks. Their highly public campaign has fed a wave of defiance and forced the government to promise relief for borrowers.

But the organization is not "superman," warned PAH organizer Guillem Domingo.

"This country’s politicians need to step-up, be courageous," he said.

Spanish bailout may prove to be stopgap measure

Spain's "indignados" or M-15, which helped spark the global "Occupy" movement, is also flexing its muscles. While huge public protests have largely died down, the group, along with the PAH, has seen an opportunity in the country's estimated one million empty homes for the growing number of homeless.

And on June 15, activists filed a case against the former management of one of the largest lenders Bankia, whose partial nationalization helped push Spain to seek the EU bailout.

The mass movement has helped raise tens of thousands of euros via crowdsourcing to bring a case against the bank. 

Ghost towns tell the story of Ireland's faded dream

The apartment illegally occupied by Cortes and Valderrama is owned by CatalunyaCaixa, a regional bank. The unofficial residents' offers to pay rent to the bank have so far gone unanswered, PAH organizer Domingo said.

CatalunyaCaixa did not respond to a request for information or comment on their plans for the apartment building.

Still, defying the powers-that-be has energized Valderrama and Cortes.

"Every day that passes I feel stronger," Valderrama said. "I have gone through so much, and every time you do you become more powerful."

"I lost my shame many years ago," Cortes added and smiled.

The Associated Press and Reuters contributed to this report.

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Police in Frankfurt, Germany, arrested about 400 "Blockupy" protesters Friday for defying a ban on anti-austerity demonstrations.

Several hundred people took to the streets to protest the European Union's austerity measures and the power of banks, as part of a four-day anti-capitalist "Blockupy" protest due to run until Saturday.

 According to Der Spiegel, around 5,000 police were on the ground backed up by water canons. There was no violence.

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The protesters are angry at the misery they say governments are inflicting on people with their response to the crisis, which has intensified since inconclusive elections in Greece this month fueled concerns about its future in the euro zone.

"The Greek austerity measures are making Greece go kaputt even faster," said protester Leonard Loch, 37, from Hamburg. 

 The "Blockupy 'alliance criticized the massive police presence in Frankfurt, which is the seat of the European Central Bank and the largest financial center in continental Europe. The demonstrators were "all prudent and were holding back," Frauke Distelrath, spokesperson for the activist group Attac, told Die Welt. 

A court on Monday authorized a rave dance party organized by protesters on Wednesday and protests scheduled for Saturday, but ruled against them taking place on the other days. 

On Wednesday, police peacefully removed demonstrators from outside the ECB's Frankfurt headquarters and detained 150 demonstrators on Thursday for defying a ban on protests.

Reuters contributed to this report.

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