Traders braced for market turbulence amid bailout chaos in Cyprus There was speculation on Sunday night, however, that the Cyprus was working on a proposal to soften the imapct on smaller savers. It was reported that the Cypriot government was discussing with lenders the possibility of changing the levy to 3pc for deposits below €100,000 and to 12.5pc for above that sum. The Cypriot banking system was closed over the weekend by the central bank in a move that blocked electronic transfers and limited cash withdrawals to €400. The Cypriot cabinet reportedly declared Tuesday as another bank holiday to restore calm. According to analysts bank deposits represent about 380pc of GDP. Around 37pc of deposits belong to foreigners - and 30pc of these are owned by people who are not EU citizens. Analysts at Barclays said: "We believe the imposition of a levy on depositors in Cyprus is a material development that furthers the erosion of bondholder protection at European banks." The analysts said the eurozone was better prepared for this bail-out that the previous four due to stronger banks and more support from the ECB. But added: "Some one-off reaction is possible, especially in Italy and Spain, where political risks and bond supply remain key factors." Analysts at JP Morgan reckoned the deal could be challenged under the European Convention of Human Rights. Sharon Bowles, the chairman of the European Parliament's Economic and Monetary Affairs Committee and MEP for South East England, said: "This grabbing of ordinary depositors" money is billed as a tax, so as to try and circumvent the EU's deposit guarantee laws. Figures from the ECB show that Britons have about €2bn on deposit in Cypriot banks - more than any other European country after Greece. As well as British armed services personnel, Cyprus has tens of thousands of retired British expats. A total of €170m could be raised from British accounts. George Osborne said the Government would protect British depositors in Cyprus: "For people serving in our military and serving our government we are going to compensate anyone affected by this bank tax; people who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax."