Europe Debt, Cyprus | featured news

With time running out until Cyprus’s devastated banks must reopen their doors to the public, Cypriot and European officials are scrambling to put in place a set of measures that would allow jittery depositors access to their savings while preventing many billions of euros from fleeing the country.

As Cypriot politicians raced to find a new financial rescue plan ahead of a Monday deadline, tensions built in the streets of the capital. Residents withdrew what money they could from ATMs amid concern the banks could collapse.

As it tries to play Russia off against Europe to salvage its economy, Cyprus has embarked on a high-stakes poker game that could see almost everyone lose.

The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone.

Lawmakers in Cyprus were poised Tuesday to reject a bailout plan that would have rescued the country’s banks but forced savers to chip in for the cost, sending the tiny island nation into a tailspin over its economic future.

Homeowners have told of how sales of their properties are on hold and businesses have called for clarity amid banking uncertainty in Cyprus. The country is braced for an emergency session of its parliament, and a planned vote, regarding a 10bn euro ($13bn; £9bn) financial rescue.

U.S. stocks fell as an unprecedented Cyprus bank-deposit tax sparked renewed fears about Europe's debt crisis.

Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout of up to 10 billion euros — over half the size of its economy — officials said.