* Putin says deal unfair, Gazprom sets sights on failed bank *
The Cyprus government has postponed until Tuesday a crucial vote on a harsh savings levy to try and improve the package, part of a 17.5 bln rescue plan and to ensure parliamentary consensus, despite anger at a lack of solidarity from Eurozone partners, especially Germany and Finland.
President Nicos Anastasiades addressed deputies in Nicosia, explaining that he was blackmailed into accepting the "bail in" of 5.8 bln euros on Friday night and said that the European Central Bank would not give any liquidity to Cypriot banks that would result in a bank run and collapse.
The governent said over the weekend it would impose a tax of 6.75% to 9.9% on savings and deposit accounts, but Anastasiades said in a national televised address on Sunday night that the Finance Ministry was negotiating better terms with international lenders and would offer an incentive of full compensation from bonds linked to future oil and gas revenues.
Many of the depositors are Russians, with Moody's estimating these at 31 bln dollars, while the planned levy has already elicited an angry reaction from President Vladimir Putin. Germany's Finance Minister Wolfgang Schauble has long reiterated that Cyprus was a haven for Russian oligarchs and money laundering, insisting that the Bundestag would never bail out an economy that harbours illegal funds.
Cyprus is about to appoint an international audit firm to conduct due diligence and determine if funds in Cyprus were illicit, while media reports have suggested that the Russian colossus Gazprom may be interested to take over the island's second largest bank, Laiki Popular Bank, that was nationalised last year with a 1.79 bln state rescue.
The president of the House of Representatives said a debate on the bank levy would be held at the parliamentary finance committee on Tuesday morning and a final vote delayed to 6pm local time (1600 GMT), suggesting banks, shut on Monday for a bank holiday, will remain closed on Tuesday.
The euro zone has indicated that changes would be acceptable as long as the return of around 6 bln euros is maintained. If the Cypriot parliament votes the deal down, the euro zone would face a risk of being dragged back into crisis.
"It is up to the government alone to decide if it wants to change the structure of the … contribution (from) the banking sector," European Central Bank policymaker Joerg Asmussen, who was pivotal in the weekend negotiations, told reporters on the sidelines of a Berlin conference.
People rushed to cash machines to get their funds over the weekend, prompting the central bank to to calm nerves and say ATMs were replenished on Monday and money was available again.
"The most important question is what would happen the following day if the bill isn't voted," Cyprus central bank governor Panicos Demetriades told parliament.
"What would certainly happen is that our two big banks would need to be consolidated. This doesn't mean that they would be completely destroyed. We will aim for this to happen in a completely orderly way."
U.S. economist Paul Krugman wrote in The New York Times: "It's as if the Europeans are holding up a neon sign, written in Greek and Italian, saying 'Time to stage a run on your banks!'"
PUTIN ANGRY
"It turns out that the euro zone actions … took place without discussions with Russia, so we will consider the issue of restructuring the (Cyprus) loan taking into account our participation in the joint actions with the European Union," Russian Finance Minister Anton Siluanov told Reuters.
President Vladimir Putin criticised the bank levy as unfair and setting a dangerous precedent.
"Putin said that such a decision, should it be made, would be unfair, unprofessional and dangerous," Kremlin spokesman Dmitry Peskov told reporters.
Anastasiades, a conservative elected just three weeks ago, said in a TV address that the tax was an alternative to a disorderly bankruptcy. It was painful, but "will eventually stabilise the economy and lead it to recovery".
Former central banker Afxentis Afxentiou, ex president George Vassiliou and Nicos Shacolas, head of the island's biggest retail group, urged deputies to "show courage and vote the measures, as painful as they may be, otherwise we will see a collapse of the banking system and the whole economy.
"Essentially parliament is called to legalise a decision to rob depositors blind, against every written and unwritten law," said Yiannakis Omirou, speaker of parliament and head of EDEK, the small Socialist party. "We refuse to subscribe to this." His rejection was echoed by the former ruling communist Akel party that is widely accused of causing the economic crisis by refusing to deal with a growing banking problem in the past five years and not reducing a runaway public sector deficit, that made any hope of government support to a troubled banking sector as unsustainable.
