Major depositors in Cyprus's biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed on Saturday, sharpening the terms of a bailout that has shaken European banks and saved the island from bankruptcy.

Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the euro zone has made bank customers contribute to a bailout - had already unnerved investors in European lenders this week.

But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back.

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The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.

Banks reopened to relative calm on Thursday after an almost two-week shutdown and the imposition of capital controls. The streets of Nicosia were calm on Saturday, filled with crowds relaxing in its cafes and bars.

There is no sign for now that ordinary customers in other struggling euro zone countries like Greece, Italy or Spain are taking fright at the precedent set by the bailout.

"Cyprus is and will remain a special one-off case," German Finance Minister Wolfgang Schaeuble, one of the architects of the euro zone's response to a debt crisis now in its fourth year, told German mass-selling daily Bild.

"The savings accounts in Europe are safe."

European officials have worked hard this week to stress that the island's bailout was a unique case - after a suggestion by Eurogroup chairman Jeroen Dijsselbloem that the rescue would serve as a model for future crises rattled European financial markets.

"Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis," said Schaeuble.

"Cyprus's economy will now go through a long and painful period of adjustment. But then it will pay back the loan when it is on a solid economic foundation."

Cypriot President Nicos Anastasiades said on Friday that the 10-billion euro ($13 billion) bailout had contained the risk of national bankruptcy and would prevent it from leaving the euro.

Cypriots, however, are angry at the price attached to the rescue - the winding down of the island's second-largest bank, Cyprus Popular Bank, also known as Laiki, and an unprecedented raid on deposits over 100,000 euros.

Etyk, a bank worker's union, called a rally outside parliament for Thursday to protest against potential job cuts and a hit on their pension funds.

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Banks on the tax haven of Cyprus opened Thursday for the first time in 12 days amid the island's continuing financial crisis, but the country's financial controls could remain in place for another month.

Strict limits on the amount of money that could be withdrawn have been imposed – people will be able to withdraw 300 euros ($383) a day and no checks will be cashed – amid fears of a run on the banks.

Account holders showed up hours before the banks were due to open to get in line.

Early indications were that there was no mass rush to withdraw cash, with just 13 people waiting outside one large Bank of Cyprus branch on the island as it opened at noon local time (6 a.m. ET). They were surrounded by a scrum of journalists.

“We need only from you cooperation, understanding and please patience,” the manager of the branch said before opening.

However a small crowd of people did press against the doors of a branch of Laiki Bank, which is being liquidated. CNBC sources estimate those with more than 100,000 euros (about $128,000) in accounts in Laiki Bank could lose 40 to 70 percent of their deposits.

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During the banking shutdown, people could only withdraw 100 euros (about $127) a day from the country's two biggest banks, using ATMs. Most who lined up for the opening Thursday were elderly people and those without ATM cards. 

Deposits above 100,000 euros with the Bank of Cyprus will be frozen and 40 percent of each account will be converted into bank stock. Accounts in both banks with balances under 100,000 euros will be fully protected.

A previous proposal to take less from all bank accounts was vetoed by the Cypriot parliament.

Later Thursday, the Cypriot foreign minister Ioannis Kasoulides said curbs on money movement would remain in place longer than originally planned, "probably over a period of about a month," according to Reuters.

The country is seeking to meet the terms of a bailout from the European Union of 10 billion euros ($12.9 billion) and, in order to raise enough funds to meet strict conditions imposed by the EU, it is preparing to take money from bank accounts.

Ahead of the banks’ reopening, money was flown into the island and guards were seen delivering cash to banks in armored vehicles.

The banks were due to close at 6 p.m. local time (12 p.m. ET).

There was some relief on the island that the banks were finally opening again, but this was mixed with fear about what could happen.

'Slow death'
Yorgos Georgiou, who owns a dry cleaning business in Nicosia, told Reuters that "finally people's mood will be lifted and we can start to trust the system again."

But he added: "I'm worried about the poor kids working in the cashiers today, because people might vent their anger at them. You can't predict how people will react after so many days."

Kostas Nikolaou, a 60-year-old retiree, told Reuters that the uncertainty of the past two weeks had been "like a slow death."

"How can they tell you that you can't access your own money in the bank? It's our money, we are entitled to it,” he added.

The country’s president, Nicos Anastasiades, has described the bailout deal as “painful” but essential.

However, Nobel laureate economist Christopher Pissarides said it was “extremely unfair to the little guy.”

“For the first time in the euro zone, depositors are (being) asked to bail out failing banks," he said. "Now that used to be the case in the 1930s, especially United States (and) caused big bank runs. It has been decided since then that we shouldn’t allow that to happen again.”

Among other controls, the island's central bank will review all commercial transactions over 5,000 euros and scrutinize transactions over 200,000 euros on an individual basis, Reuters reported. People leaving Cyprus can take only 1,000 euros with them. An earlier draft of the decree had put the figure at 3,000.

Reuters summed up the situation facing the island:

With just 860,000 people, Cyprus has about 68 billion euros in its banks - a vastly outsized financial system that attracted deposits from foreigners as an offshore haven but foundered after investments in neighboring Greece went sour.

The European Union and International Monetary Fund concluded that Cyprus could not afford a rescue unless it imposed losses on depositors, seen as anathema in previous euro zone bailouts. The bailout looks set to push Cyprus deeper into an economic slump, shrink the banking sector and cost thousands of jobs.

European leaders said the bailout deal averted a chaotic national bankruptcy that might have forced Cyprus out of the euro.

Many Cypriots say the deal was foisted upon them by Cyprus's partners in the 17-nation euro zone within the European Union, and some have taken to the streets to vent their frustration.

CNBC's Michelle Caruso-Cabrera and Katie Slaman, and Reuters contributed to this report.

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This story was originally published on Thu Mar 28, 2013 4:52 AM EDT

NICOSIA, Cyprus - Anguished Cypriots fear a run on banks when branches on the tiny tax haven reopen for first time in almost two weeks on Thursday.

Since March 16, customers have only been able to withdraw limited amounts of cash from ATMs after banks closed to allow Cypriot officials and European leaders to hammer out a 10-billion euro ($13-billion) rescue meant to avert a chaotic national bankruptcy.

However, some believe the deal will instead push the country further into economic crisis as thousands of bank employees lose their jobs. The country's unemployment rate is about 14 percent.

Under the terms of the EU bailout, accounts of more than 100,000 euros ($128,460) at the islands' two biggest banks will be frozen. Depositors with accounts at Laiki Bank, which is being liquidated, won't get paid for years and won't get all of their money back. CNBC sources estimate those with bank accounts in Laiki above 100,000 euros could lose 40 to 70 percent of their deposits.

Deposits above 100,000 euros with the Bank of Cyprus will be frozen and 40 percent of each account will be converted into bank stock. Accounts in both banks with balances under 100,000 euros will be fully protected.

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Many Cypriots say they do not feel reassured by the bailout deal and are expected to besiege banks as soon as they open their doors Thursday.

"We have an uncertain future in in Cyprus," said Chris Sofroniou, as he waited in an ATM line in Nicosia. "There's uncertainty in our future in our children, and we are very, very disappointed with the European Union. We are being treated like third-class citizens and we are very, very angry."

A spokeswoman for the island's central bank said banks would not reopen until 12 p.m. local time (6 a.m. ET) on Thursday, according to Reuters.

The spokeswoman said banks would open their doors between midday and 6 p.m. (1600 GMT). The Cypriot authorities are expected later on Wednesday to detail the capital controls they plan to impose to prevent a flight of funds. 

The last-minute deal was reached Monday, just hours before the EU was due to cut off the country’s financial lifelines.

The agreement ended a week of protests in Cyprus, long lines at cash machines, and a tense geopolitical standoff after European officials made the unprecedented demand that ordinary Cypriot savers share in the cost of any bank bailout.

Cyprus promoted itself as an offshore financial haven by making depositing money there attractive to foreigners. The result? A financial sector that dwarfed the rest of the economy.

Without that deal, Cyprus’ banks would have collapsed, dragging down the economy and potentially pushing it out of the euro zone.

'Extremely unfair'
While the country’s president, Nicos Anastasiades, called the deal “painful” but essential, Nobel laureate economist Christopher Pissarides said the bailout was “extremely unfair to the little guy.”

“For the first time in the euro zone, depositors are (being) asked to bail out failing banks," he said. "Now that used to be the case in the 1930s, especially United States (and) caused big bank runs. It has been decided since then that we shouldn’t allow that to happen again.”

Finance Minister Michael Sarris said that the government was implementing measures to halt a run on the banks when they opened on Thursday, although he did not go into detail, according to Reuters.

It isn’t only bankers and the wealthy who are angry, however. On Wednesday, around 3,000 high school students protested the plan agreed to with the European Union, International Monetary Fund and European Central Bank.

"They've just got rid of all our dreams, everything we've worked for, everything we've achieved up until now, what our parents have achieved," a student named Thomas told Reuters. 

So as Cyprus waited to see what Thursday would bring, citizens mourned what they saw as the end of an era. 

“It’s the destruction of the country,” Cypriot Aristos Sardi said. “Who they think they are? For this country the colonial days finished in the 1960s.”

“I am heartbroken,” he added.

NBC News' F. Brinley Bruton, Reuters and The Associated Press contributed to this report.

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This story was originally published on Wed Mar 27, 2013 11:00 AM EDT

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.

Banks in Cyprus will remain closed until Tuesday as the country tries to avert financial meltdown after rejecting the terms of a controversial bailout, turning instead to Russia for help.

An official said banks, which been shut for days amid fears of a run on savings, will stay closed on Thursday and Friday, CNBC and Reuters reported. Monday is a public holiday.

Earlier, Germany said the banks were effectively insolvent and might never open at all unless Cypriot political leaders accepted a bailout deal.

Thousands of Cypriots withdrew savings after the unexpected European Union announcement that it would provide $12.9 billion in exchange for up to 10 per cent of the value of all bank deposits – a move that would have thrown the Mediterranean island a lifeline but hundreds of thousands of citizens out of pocket.

Germany's finance minister, Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds,” according to a BBC report, meaning savers might lose all their money if no deal was reached.

Greek media reports suggested the Cyprus Popular Bank had been sold to Russian investors, but the Cypriot government denied such a deal, Reuters said.

German Chancellor Angela Merkel said the ball was now in Cyprus' court. "I regret the vote of the parliament yesterday," she told reporters. "But of course we respect it and will now look to see what proposals Cyprus makes.

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"From a political point of view, I say that Cyprus needs a sustainable banking sector. Today's banking sector is not sustainable," she added.

Even before the deal was rejected, Cypriot Finance Minister Michalis Sarris was already in Moscow working on an alternative plan to extend loans by using the island’s natural resources as a guarantee, according to English-language Cyprus Mail newspaper.

The crisis leaves the 17-nation Euro currency zone in uncharted territory: Greece, Portugal, Ireland, Spain and Italy have all accepted austerity cuts in return for aid.

Cyprus’ parliament rejected the deal late Tuesday when 36 lawmakers voted unanimously against it and the ruling party abstained, Reuters reported. Outside the parliament, hundreds demonstrated, chanting: "They're drinking our blood."

"The voice of the people was heard," jubilant 65-year-old retiree Andreas Miltiadou told Reuters after the vote.

Ivan Tchakarov, chief economist at Renaissance Capital, told CNBC that Russia, which was enraged by the unexpected European deal, could step in to save Cyprus from total financial collapse.

"This situation presents a fantastic opportunity for Russia and even President Putin to take moral high ground and to extend another loan to Cyprus and to become a savior of Europe," he told CNBC in Moscow.

"At the end of the day we're only talking about an additional seven to eight billion dollars of additional money that is needed to have a complete package for Cyprus, this is small change for Russia.”

Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors.

Russia wasn’t the only critic of the deal, which was greeted with widespread dismay among global money markets. In an editorial, Bloomberg said it was the “worst” decision of the entire regional financial crisis, while the Economist panned it as "unfair, short-sighted and self-defeating."

Reuters contributed to this report.

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Cyprus's parliament overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout on Tuesday, plunging one of the smallest European states closer to financial oblivion.

The rejection, with 36 votes against, 19 abstentions and one absence, brought Cyprus to the brink of financial meltdown.

But jubilant crowds outside parliament broke into applause, chanting: "Cyprus belongs to its people."

"The voice of the people was heard," said Andreas Miltiadou, a 65-year-old pensioner among the demonstrators.

The European Central Bank said it was in contact with its IMF and EU partners and remained committed to providing liquidity within certain limits.

"The ECB takes note of the decision of the Cypriot parliament and is in contact with its troika partners," the bank said in a statement, according to Reuters. "The ECB reaffirms its commitment to provide liquidity as needed within the existing rules."

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The widely criticized bailout deal looked set to collapse despite a last-minute compromise attempt Tuesday.

The European deal could also be scuppered by a furious Russia, which is one of the biggest foreign investors in Cyprus and which stands to be among the biggest losers.

Reuters said the situation had “potentially severe consequences for the rest of the troubled euro zone.”

One analyst told CNBC Russia might even seek revenge by disrupting energy supplies to Europe. Russian President Vladimir Putin on Monday criticized the bailout as "unfair, unprofessional and dangerous."

There were media reports that Cypriot Finance Minister Michael Sarris, who was in Moscow Tuesday, had resigned, but he told Reuters by text message that there was "no truth" to the claim, which had further rattled nerves over the crisis.

Cypriots awoke Saturday to the surprise announcement that up to 10 per cent of their bank account deposits might be seized as part of a $13 billion rescue package agreed by the European Union countries and the International Monetary Fund (IMF).

Banks on the Mediterranean island have been ordered to remain closed until Thursday amid fears of a massive rush to withdraw deposits in advance of the deal, further precipitating a financial collapse that could cause an economic ripple effect throughout the region and beyond.

Thousands withdrew savings over the weekend, emptying ATMs and sending global money markets into a steep dive.

Panicos Demetriades, chief of the country's central bank, told the Cypriot parliament's finance committee Tuesday that banks stand to lose more than 10 percent of their deposit base within a matter of days if a levy on bank deposits is imposed.

The European bailout has been widely criticized by commentators. In an editorial, Bloomberg said it was the “worst” decision of the entire regional financial crisis, while the Economist panned it as "unfair, short-sighted and self-defeating."

Cypriot and euro-zone officials sought to soften the initially proposed levy of up to 9.9 percent, ensuring that deposits below the value of $25,000 were not affected, in order to ease the burden on small savers and overcome lawmaker opposition, CNBC reported.

Adding to the uncertainty, Greek media reports have suggested Russian energy giant Gazprom might offer Cyprus an alternative bailout deal.

Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors, and Moscow has already given the Mediterranean country a sovereign loan to ease its financial crisis.

Steve Keen, professor of economics and finance at Australia's University of Western Sydney, told CNBC that Russia could retaliate against the perceived proxy attack on its citizens and their money.

"If you try to target the Russians, and there's President Putin acting under the image of the 'strong man' of Russia, why would he not then decide to shut down gas supplies to Germany until that was righted?" he said.

“If you're going to attack money laundering then attack it directly, don't make Cypriot peasants and small businessmen collateral in your campaign against Russian oligarchs. Declare the campaign rather than doing it under the carpet like this too," he added.

Reuters and NBC News' Ian Johnston contributed to this report.

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This story was originally published on Tue Mar 19, 2013 9:01 AM EDT

LONDON — Banks in Cyprus will remain closed until Thursday to prevent panic withdrawals in the wake of a surprise bailout plan that has sent money markets into a tailspin, the country's government announced Monday.

Ministers met Monday to revise a plan to seize up to 10 per cent from bank accounts held on the Mediterranean island — the price of a deal, brokered by the European Union and the International Monetary Fund (IMF).

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Cypriots and foreign investors emptied ATMs following Saturday’s unexpected 10 billion euro ($13 billion) deal under which savers must surrender up to 10 percent of bank deposits. Banks in Cyprus were due to remain closed because of a public holiday Monday.

A debate on the measure has been delayed until Tuesday. Meanwhile, the country’s banks, already shut on Monday for a bank holiday, will remain closed on Tuesday and Wednesday to avert any panic.

Adding to the uncertainty, Greek media reports on Monday suggested Russian energy giant Gazprom might offer Cyprus an alternative to the bailout. 

Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors, and Moscow has already given the Mediterranean country a sovereign loan to ease its financial crisis.

Russia’s president Vladimir Putin criticized the bailout as "unfair, unprofessional and dangerous," Reuters said, citing a spokesman.

The Economist also criticized the deal, describing it as "unfair, short-sighted and self-defeating."

Financial markets in Europe fell sharply in early trading Monday following the surprise announcement of a levy on bank accounts in Cyprus as part of a financial bailout.

Markets in Italy and Spain — countries regarded at the highest risk of further financial crisis – saw some of the biggest share falls, particularly in the banking sector.

"It's a Cyprus shock,” Ken Hasegawa, a commodity sales manager at Newedge in Tokyo, told Reuters.

The bailout caused dismay in Cyprus. "They shouldn’t touch the deposits. They’re just killing the people," 58-year-old Miltiades Papamiltiades, an unemployed former construction worker, told the English-language  Cyprus Mail news site. "No one will ever deposit money again into the banks on the island. It is the end of our economy," he added.

Of the $90 billion deposits held in Cyprus banks, a little under half is held by non-residents, mostly Russian.

Alex Spillius, of the U.K.’s Daily Telegraph, reported that Cyprus in recent years had become, like off-shore haven Monaco, "something of a sunny place for shady people." He wrote:

"By 2011, the IMF reported that the assets of Cypriot banks were equivalent to 835 per cent of annual national income. Some of that was down to investment by foreign-owned banks, but most was Cypriot.

This imbalance might have been sustainable had the country’s two largest banks not made loans to the Greek government worth 160 per cent of Cypriot GDP. It has never been clear whether that risk was taken out of ethnic solidarity, or from a presumption that the Greeks knew what they were doing. But in any event, it was disastrous."

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This story was originally published on Mon Mar 18, 2013 6:32 AM EDT