The Cyprus cabinet was meeting in crisis session Thursday to approve a "Plan B" bailout deal with the EU and IMF, as a nervous crowd gathered outside parliament expecting the plan 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 while it redrew the plan to resolve the chaos unleashed by an initial scheme 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 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 good.
Around 200 protesters outside parliament, mostly employees of the bank in the eye of the storm, including many women, held placards which read: "Hands off Laiki," and "Laiki now, what next?"
Two lines of around 50 anti-riot police, outnumbered by the media, closed off access to the parliament building.
Many of the protesters vented frustration at Germany and its Chancellor Angela Merkel, seen as imposing tough terms on Cyprus in return a bailout. "We won't be Germany's slaves" and "Merkel fascist, Merkell kaput," read their banners.
"Russia, help," was another message.
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, with none voting in favour. The result sparked celebrations among thousands of demonstrators gathered outside.