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The island has been in turmoil since the collapse of Greece's economy, where Cypriot banks had huge investments. The Cypriot rescue package is aimed at the country's two largest banks, Bank of Cyprus and the now defunct Laiki. A narrow majority of MPs initially rejected the legislation on Thursday evening. But lawmakers switched their vote just hours later, by 41 to three in favour of the two bills.
As part of the agreement, those with more than €100,000 in their accounts at Laiki Bank will lose an unspecified amount in a "haircut" - expected to be as much as 40 per cent of their investment. That levy is designed to cover most of the €5.8 billion that Cyprus is required to pay in order to qualify for the €10 billion loan.
The measures are designed to raise billions towards the bailout, but protect bank customers with smaller deposits. Under EU rules, deposits of €100,000 or less are insured against bank failures.