Bank of Cyprus employees sit outside of Greece’s Finance Ministry.

Savers in Cyprus could face losing one-quarter of their bank deposits under new proposals being discussed by the government as ministers flew to Brussels to salvage a European bailout.

The new bank levy would only apply to people with more than €100,000 (£85,260) in their accounts, according to the finance minister, Michael Sarris, who also said that significant progress had been made in talks with European officials.

President Nicos Anastasiades travelled to Brussels to work out an alternative plan to raise funds that would allow the country to qualify for an international bailout. Cyprus must raise €5.8bn (£4.9bn) before Monday to qualify for the €10bn EU bailout it needs to prevent the collapse of its banks and a potential departure from the eurozone.

The idea of raising money through a one-off levy on bank deposits was criticised in Cyprus, Russia and elsewhere and was unanimously rejected by the Cypriot parliament earlier this week, but is being reconsidered after negotiations with Russia to find alternative finance did not achieve a result.

On Friday, the Cypriot parliament passed nine bills, including three that would see ailing banks restructured, starting with Laiki, Cyprus’s second-largest bank, a “national solidarity fund” and capital controls that would prevent large withdrawals from the country. A decision on the controversial bank savings levy and how it would be applied is due on Saturday.

Other Cypriot politcians discussed a smaller bank levy of 1% which would be aplied to all accounts. The debate is divided between those that want the levy to be borne only by the wealthy which includes a high percentage of Russians who hold €30bn in Cypriot banks.

Eurozone ministers are scheduled to meet on Sunday to decided how to help Cyprus avoid economic chaos. The European Central Bank has threatened to cut off funding from Monday and the banks face a run of investors withdrawing money when they re-open.

The Cypriot parliament will meet after the meeting of the eurozone ministers on Sunday evening.

George Vassiliou, the former president of Cyprus, told the Guardian on Friday that it was imperative that the banking system was not allowed to collapse.

“We have developed a unique service sector based on confidence in the banking system. If that confidence is lost then you have nothing left. Everything that has been created will be destroyed with formidable repercussions.”

Banks in Cyprus have been closed since Monday and many businesses have been accepting only cash payments. The Foreign Office has advised Britons travelling to Cyprus to take enough euros to cover the cost of their trip and to guard their cash carefully.
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