Depositors in the Bank of Cyprus, the biggest bank on the island, will reportedly lose from 30 to 40 per cent on their holdings above 100,000 euro as result of a bailout agreement which Cyprus and the troika of international backers signed on Monday.

Irish Radio is quoting the chairman of the Cypriot parliamentary finance committee, Nicholas Papadopoulos, who said that the levy of 30 per cent will be imposed on the deep-pocketed savers.

"I haven't heard a formal announcement about the haircut, but this is the figure I heard," he said.

Bloomberg reports an even bigger figure as it refers to two EU officials, who claimed that the losses would be no more than 40 per cent on uninsured depositors at the Bank of Cyprus.

At dawn on Monday, Cyprus and the troika of international backers (EU, ECB, IMF) reached agreement  

Under the plan the depositors in Bank of Cyprus will be compensated with equity in the bank, while Laiki Bank, which is the island’s second largest financial institution, will be closed down.

Those with deposits under 100,000 euros in both banks will continue to enjoy the protection of the state's guarantees, after an earlier proposal to impose a 6.75% tax on them provoked anger.

“The result that was found is right,'' German Chancellor Angela Merkel said. “It also makes those who helped cause these undesirable developments play their part. That is how it should be.”

Germany has long insisted Cypriot banks, which attracted foreign investors with high interest rates, needed to contribute to the bailout.

“I think that a fair sharing of the burden was achieved,'' she said. “On one hand, the banks have to take responsibility for themselves. That is what we have always said: we do not want taxpayers to have to rescue banks, we want banks to rescue themselves.”

It will help

"stabilize the situation in Cyprus and help Cyprus back onto a path of sustainable consolidation. I think the solution can help win back lost confidence for and in Cyprus," German Finance Minister Wolfgang Schaeuble told a news conference after the 11th-hour talks ended with a deal.

"It is the best path possible even if it isn't an easy one."  

Russia doesn’t appear so optimistic.

"I think they continue stealing what's already been stolen. We need to understand what this story will finally lead to," Russian Prime Minister Dmitry Medvedev commented on the move during a meeting with his aides on Monday.

Despite the deal Cyprus will remain at risk of default and a Eurozone exit for a "prolonged period,"believes Moody's senior credit officer Sarah Carlson.

"The system's profile as an offshore financial center is unlikely to survive this crisis," Carlson added. "The potentially irreparable damage to the country's current drivers of economic growth leaves its ability to sustain its current debt highly in doubt."

Banks are due to reopen on Tuesday, however, withdrawal limits will be imposed to avoid a run of capital.

• A Permanent Economic Emergency