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The Cyprus cabinet was meeting in crisis session Thursday to approve a "Plan B" bailout deal with the EU and IMF, as crowds gathered outside parliament expecting the measure to be put to a vote.
The island's politicians have until Monday to clinch a deal with the lenders or face being choked from European Central Bank emergency funds, a move that would likely cause the teetering banking sector to collapse.
The government urged against panic Thursday while it hammered out a revised plan to resolve the chaos unleashed by an initial plan to tax bank accounts -- many of them Russian -- by 5.8 billion euros ($7.47 billion) to complement 10 billion euros in eurozone and IMF loans between now and 2016.
Part of the package, a government statement said, involves setting up a "solidarity investment fund," which media reported would nationalise provident funds, with bonds issued against future natural gas revenues.
The deal needs to be passed by the cabinet before being brought to parliament for approval, which officials said was likely to happen later Thursday.
With Cypriot banks in lockdown until next Tuesday, queues grew at cash dispensers outside the island's second largest bank, Popular Bank -- Laiki in Greek -- as rumours, denied by the central bank, circulated that it would close for ever.
Protesters outside parliament held placards saying, "Hands off Laiki," and "Laiki now, what next?"
Lawmakers on Tuesday flatly rejected a highly unpopular measure that would have slapped a one-time levy of up to 9.9 percent on bank deposits as a condition for the loan, leaving the government scrambling to find other ways to raise cash to repay its debts.
The 19 MPs of the ruling Disy party abstained while 36 lawmakers voted against the measure. None voted in favour.