Retail Sales Rebound In February

Strong demand for tablets has helped retail sales increase by more than expected in February.

Excluding fuel, they rebounded by 1.9% when compared to January, and by 3.3% on the year, according to the Office for National Statistics (ONS).

The jump in both volume and amount spent follows subdued year-on-year retail sales growth rates since September 2012.

Strong sales at computer equipment retailers and department stores helped drive February's rise, and online also performed well, the ONS said.

Spending online accounted for 9.7% of all retail spending, excluding fuel, in February. The average weekly spend on the internet was £540m - an increase of over 10% when compared with February 2012.

It comes after a disappointing start to 2013, when sales plunged as a result of heavy snow across swathes of the UK.

Deloitte's UK head of retail, Ian Geddes, said February's figures were good news for the sector - but warned that caution should be exercised because New Year sales often continue into February.

He added: "The period measured does not include the last week of February when poor weather hit, so next month's figures may be affected."

The data comes a day after Chancellor George Osborne unveiled his Budget - but Mr Geddes said it provided "little respite" for the troubled high street.

"Any retailer expecting consumers to have more money in their pockets as a result of this Budget may be disappointed," he said.

But he added that the reduction of the corporation tax rate would "significantly benefit" UK-based retailers, which represent some of the largest UK corporation tax payers.

The data also came as clothing retailers Next and Ted Baker reported full-year financial results.

Both companies said sales had increased in 2012, and joined a number of other companies - including Zara, Sports Direct and Asos - in reporting strong figures despite the difficult economic conditions.

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Budget: George Osborne Defends Economic Plans

George Osborne has defended his flagship Budget plan to boost the housing market, amid warnings it is already "unravelling" and risks pushing up prices.

The Chancellor put a "Help-to-Buy" scheme and mortgage guarantees at the heart of his financial statement in the hope they will kick-start an economic recovery.

People without a large deposit will have loans underwritten by the state, with interest-free loans also available for new-build properties.

The scheme will be open to those with as little as a 5% deposit and worth up to 20% of the value of a property costing up to £600,000.

George Osborne visiting a housing development on Thursday

Amid fears the moves could spark a new debt-fuelled boom, Mr Osborne was forced to deny they will encourage people to buy homes they cannot afford.

Speaking on Sky News, he insisted: "It doesn't mean a return to five or six years ago when you had those big 125% Northern Rock mortgages.

"It is just saying to people if you can get together a decent deposit, we are going to help you buy a home. People are being robbed of that at the moment because of the problems in our financial markets."

Amid confusion about the limits of the scheme, shadow chancellor Ed Balls claimed it could help the rich buy a subsidised second home worth up to £600,000.

He asked: "Surely people struggling to get a mortgage and those who want to own their first home must be the priority for help, not the small number who can afford to buy a second one?

"We will only tackle the housing crisis and help first time buyers if we finally build the new affordable homes we have said should be at the heart of any proper plan for jobs and growth."

Earlier on Sky News, he warned: "The devil is in the detail."

George Osborne and Ed Balls bumping into each other in Millbank

Housing minister Mark Prisk later clarified people would have to sell their existing home before taking part and that buy-to-let mortgages would be excluded.

"You would first have to divest your existing property prior to being able to proceed with any Help to Buy sale. This is about family homes. It is not about second homes," he said.

But there was fresh confusion about how this would work in practice because people would not usually be able to sell their existing home before starting to buy a new property.

Meanwhile, Tory MP Kwasi Kwarteng expressed concern that flooding the mortgage market would increase house prices because there would still be little stock.

"Obviously if the amount of supply remains the same and you are making credit easier, the tendency would be for the prices to go up," he said.

Former Bank of England economist Erik Britton, of Fathom Consulting, said: "I think it's nuts. I think it's the opposite of the right solution.

"What I fear will happen is that house prices will go up from an already overvalued position and households will take on even more debt from a position where they are vastly over-extended already.

Mr Osborne with a couple who bought their flat via shared equity

"We will be back on the addiction to cheap credit which was the whole problem that pushed us into the crisis that we are already in."

New figures showing public borrowing fell to £2.8bn in February - the lowest for the month since 2008 - provided a chink of light for Mr Osborne.

And during a string of interviews to defend his Budget, he insisted Britain's problems "could be a lot worse" - pointing to Cyprus.

On Sky News, he claimed his drastic austerity measures had the public's support despite the recovery taking far longer than expected.

"I think the British public understand there is not a simple or easy answer to our country's problems but just the painstaking work of putting right what went wrong," he said.

However, research for consumer group Which? carried out immediately after the Budget showed 59% want the Government to rethink its economic plan.

Alongside the radical mortgage plans, Mr Osborne also cut the price of beer and cancelled a fuel duty hike in a bid to ease the cost-of-living.

He moved to boost small businesses by creating a new employment allowance which will save employers £2,000 on their National Insurance bills.

And plans to raise the income tax threshold have been brought forward to 2014, meaning earnings up to £10,000 will be tax-free.

But those announcements could not disguise the dismal economic figures and forecasts that showed the austerity era will last a decade.

Official growth forecasts for this year have been cut in half to 0.6% because the recovery is so weak, and next year's figure has also been downgraded.

The independent watchdog the Office for Budget Responsibility (OBR) also warned that the decline in borrowing seen in the first years of the coalition "no appears to have stalled".

Public borrowing predictions for every year to 2017/18 have been revised upwards, putting the total £55.7bn higher than it was just three months ago.

The OBR expects Britain to narrowly escape an unprecedented triple-dip recession, predicting a small increase in GDP in the first quarter of this year.

But debt is not set to fall as share of national income until two years after Mr Osborne's original 2014 target.

It is due to peak at 85.6% of GDP - equal to a massive £1.58tn - in 2016/17 - an increase of 6.4% on previous forecasts.

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Cyprus Bank Limits Cash Withdrawals Amid Crisis

Russian Money Talks In Cyprus Bailout

Updated: 12:52pm UK, Thursday 21 March 2013

By Tim Marshall, Foreign Affairs Editor

Even allowing for inflation, 10 billion euros can still buy you quite a lot these days.

For example, if you were Russia, and you used your 10 billion to bail out Cyprus, you could buy another few decades of European dependence on you for energy.

You might also get a dent in people's confidence in the EU thrown in. If you invested it all wisely, in the longer term you could even get a warm-water naval port out of it.

Not bad a return.

The Russian offer to better the terms of the EU bailout for Cyprus is not just commercial. It is an attempt to regain influence in a region of growing energy importance.

Russia had already lost power in the Mediterranean and Middle East when Egypt was flipped and turned towards the USA.

After the implosion of the Soviet empire in 1989, Moscow lost any chance of a quick return to the region and was left only with a small port on the coast of Syria to play with.

But Russia is now back on its feet, and the discovery of the potentially huge gas field in the eastern Mediterranean has given it an opportunity to again engage in the region.

It has already done a deal via Gazprom with the Israeli's over its gas fields, and is now trying to get in on Cyprus's potential gold pot.

Europe has for years been looking for a way to wean itself off energy dependency on Russia, and Cyprus was one route.

However, if Gazprom secures the rights to explore the Cypriot gas fields, this will give Moscow massive influence there.

Influence is power and that power could feasibly result, down the line, in Cyprus suggesting that the British bases on their island close.

From there, the possibility of a Russian base might emerge in what is a key part of Nato's Mediterranean strategy and an intelligence gathering post.

The UK, Greece, Turkey, and the US - all Nato members - might object. But money talks and we have seen in the last decade that Russia wins some and loses some. 

The ties between Cyprus and Russia are not just commercial and political.

We should not underestimate the cultural ties between the two, which are based on Russia's perception of itself as the guardian of Orthodox Christianity.

Whether Russia wins this geopolitical fight or not, it will continue to watch with interest the political and social fallout of the euro crisis and the democratic deficit which has been part of it.

The EU has crossed an intellectual line in Cyprus. Previous bailouts of other countries may have required austerity measures, but now unelected Eurocrats, in consultation with Cypriot leaders, have told the people that they are going to take up to 10% of their money without asking them. In Cyprus they have a word for this - theft.

This has been noticed across the European Union. If it might happen in Cyprus then it might happen in Greece, or Spain, or Italy. The raison d'etre of the Union is to ensure prosperity and the safety of its peoples, not to take money from their bank accounts.

The Cypriot politicians fear they could become the target of retribution from the people and so have hot-footed their way to Russia.

Not only might they get what in the short term looks a much better deal from Moscow, but, and this might be really what's going on, they might force Brussels to offer a much better deal to prevent Cyprus from "falling" to the Russians.

Either way - terms and conditions apply.

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Budget: 2013 Growth Forecast Is Cut In Half

George Osborne has unveiled tax breaks for beer drinkers, drivers and first time buyers as he admitted the economy is still struggling.

The Chancellor's Budget contained a string of moves designed to ease the cost-of-living, including a 1p cut in the price of beer and the cancellation of a planned fuel duty hike.

A £130bn mortgage guarantee scheme will help people without big deposits buy homes, with interest-free loans worth 20% of the value of a new build property also available.

And in what he called a Budget for "the aspiration nation", Mr Osborne said the income tax threshold will rise to £10,000 in 2014, a year earlier than planned.

The Chancellor also gave small businesses a boost by unveiling a new employment allowance which will save employers £2,000 on their National Insurance bills.

But he was forced to admit that the recovery was taking far longer than expected as he confirmed growth forecasts for this year have been cut in half to just 0.6%.

Ed Miliband called George Osborne a "downgraded Chancellor"

The independent Office for Budget Responsibility does expect Britain to avoid a triple-dip recession but public borrowing will be higher because of the floundering recovery.

It is now forecast to hit £114bn this year instead of £108bn before eventually falling to £42bn in 2017/18.

Driving home the problems facing Britain, figures released hours before the Budget showed the first rise in unemployment for a year - up 7,000 to 2.52m.

But despite growing calls to change course from his austerity regime, Mr Osborne insisted there could be no turning back.

"It is taking longer than anyone hoped but we must hold to the right track," he said.

Labour leader Ed Miliband claimed: "All he offers is more of the same - higher borrowing and lower growth - a more of the same Budget from a downgraded Chancellor.

"He is the wrong man in the wrong place at the worst possible time for the country."

The Chancellor leaving Number 11 Downing Street with his Budget

But Mr Osborne declared: "This is a Budget that doesn't duck our nation's problems. It confronts them head on. It is a Budget for an aspiration nation. It is a Budget for a Britain that wants to be prosperous, solvent and free."

He fleshed out plans for a further £2.5bn in Whitehall cuts over the next two years to fund capital spending projects.

And he confirmed plans to help working parents with tax-free childcare support and to introduce a flat rate pension by 2016.

The Capital Gains Tax holiday will also be extended and corporation tax cut further by 1% to 20% in April 2015.

But there will be anger at the extension of the 1% public sector pay cap to 2015/16, which came as civil servants staged a 24-hour strike.

There will also be further cuts in the spending review for 2015/16, up from £10bn to £11.5bn.

And the Chancellor announced that the Bank of England's remit was being overhauled but that it will keep its inflation target of 2%.

The House of Commons was extremely rowdy as Mr Osborne delivered one of the most important speeches of his career.

Shadow chancellor Ed Balls was singled out by the deputy speaker for barracking from Labour's front bench.

The Office for Budget Responsibility (OBR) now predicts growth of 2.3% for 2015, 2.7% in 2016 and 2.8% in 2017.

A Twitpic shows George Osborne at work

This means the Chancellor is now set to borrow £55.7bn more over the next five years than he was planning as little ago as in December.

Figures do show that the deficit has fallen from 11.2% of GDP in 2009/10 to 7.4% this year and is set to continue dropping until it reaches 2.2% in 2017/18.

But the OBR confirms Mr Osborne will miss his target for total public sector debt to start falling as a percentage of national income by 2015/16.

It now forecasts this will rise to a peak of 85.6% of GDP or a staggering £1.58tn in 2016/17 - an increase of 6.4% on its previous figures.

There was consternation as the speech began when the London Evening Standard newspaper posted its front page, complete with full details of the Budget, on Twitter.

The paper suspended the person behind the tweet and launched an investigation as it issued a fulsome apology for breaking the embargo.

Editor Sarah Sands said: "We have immediately reviewed our procedures. We are devastated that an embargo was breached and offer our heartfelt apologies."

John Longworth, director general of the British Chambers of Commerce, criticised Mr Osborne for not going far enough to support business and boost growth.

"We are at an unprecedented moment in economic history, and the Government should be doing everything in its power to get the economy moving", he said.

But Simon Walker, director general of the Institute of Directors, said: "We applaud this Budget. The Chancellor has stuck to his guns and held his nerve - which is exactly what we wanted to see.

"Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it."

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Budget: Labour Attacks Evening Standard Leak

Labour has called for an investigation after the Evening Standard published details of the Budget before the Chancellor stood up in the Commons.

The front page, photocopies of which were being scrutinised by the Opposition front bench as the speech began, detailed several aspects of the Budget relating to duty changes, tax and macroeconomic figures.

Labour leader Ed Miliband said George Osborne "almost need not have bothered coming" to the Commons "because the whole Budget, including the market-sensitive fiscal forecasts, were in the Standard".

"To be fair to the Chancellor of the Exchequer, I'm sure he didn't intend the whole of the Budget to be in the Standard before he rose to his feet," he said as he responded to Mr Osborne's speech.

Details of the Budget were handed to journalists ahead of the speech but the content was not to be published until after the Chancellor had addressed MPs.

The front page was published on Twitter

Evening Standard editor Sarah Sands apologised, saying she was "devastated" that the paper had broken the embargo.

"An investigation is immediately under way into how this front page was made public and the individual who tweeted the page has been suspended while this takes place," she said in a statement.

"We have immediately reviewed our procedures. We are devastated that an embargo was breached and offer our heartfelt apologies."

The newspaper's political editor, Joe Murphy, also issued an apology during the Chancellor's speech.

He tweeted: "I wish to apologise for a very serious mistake by the Evening Standard earlier which resulted in our front page being tweeted.

"We are so sorry to the House of Commons, to the Speaker and to the Chancellor for what happened. We shall be apologising to them."

Shadow Chancellor Ed Balls told Sky News: "The idea the Treasury was giving market-sensitive information about the borrowing numbers to the Evening Standard before the Chancellor has said it to the Commons, that is very unusual ... that is a big, big mistake."

When questioned about whether similar briefings had been given under a Labour Government, he said: "What Governments do is they shape the agenda. We have seen lots of leaks in the last few days but to give out the fiscal numbers, market-sensitive in advance, I've never heard of that before." 

In 1947, Labour Chancellor Hugh Dalton was forced to quit when the Budget was leaked before it was delivered in the chamber.

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Cyprus Outlines 'Plan B' To Avert Bankruptcy

The president of Cyprus is due to present a 'plan B' aimed at securing a bailout after parliament rejected demands for a controversial tax on savings.

The near-bankrupt member of the eurozone has closed its banks until Tuesday March 26 while new proposals are debated among political leaders.

President Nicos Anastasiades set a deadline of Thursday for a new rescue plan to be agreed after Finance Minister Michalis Sarris failed to make any progress on possible Russian aid during talks in Moscow.

The proposals, which might still include the controversial bank levy in some form, could also contain "the creation of a structural investment fund, reinforced by various provident funds, real estate," government sources suggested.

They also told the official CNA news agency that the fund "will also be linked with a bond issue and natural gas prospects."

Germany's Angela Merkel favours Cyprus taxing only wealthy depositors

The troika of lenders - the European Union, European Central Bank and International Monetary Fund agreed a bailout deal last Saturday on condition Cyprus raised another 5.8 billion euros through a tax on savings.

The resulting backlash has meant that banks will have been closed for 10 straight days under the crisis measures implemented to avert a run on deposits.

The move has inevitably dealt another blow to Cyprus's debt-laden economy, which contracted by 2.3% in 2012, having taken a battering from the global financial crisis and its exposure to Greece.

"We cannot buy, we cannot sell," said Costakis Sophoclides, the director of a frozen goods company in Nicosia.

"A lot of my customers are hotels and restaurants... and we cannot supply them."

Cash machines still have money available but an overall lack of liquidity has seen petrol stations close their credit card facilities and many stores refuse to accept cheques.

US Federal Reserve chief Ben Bernanke commented on the crisis late on Wednesday and said that, so far, "we are not seeing a major risk to the US financial system or the US economy."

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Budget: Osborne's Hopes Of Rescuing Economy

By Jon Craig, Chief Political Correspondent

George Osborne will today unveil a Budget with the twin aims of attempting to rescue both the British economy and the political fortunes of the Conservative Party.

The Chancellor will announce a raft of measures he hopes will not only kick-start economic growth but also reverse a Tory slump that began with his Budget a year ago.

Many Conservative MPs blame last year's so-called "Omni-shambles" Budget - containing a series of blunders that required embarrassing U-turns - for the collapse in support for the party over the past 12 months.

This year Mr Osborne has already promised help for pensioners, working couples and homebuyers.

But to avoid another onslaught from critics he will also need to provide help for motorists on fuel duty and businesses with incentives to invest.

On tax, the Chancellor is tipped to help the low paid by accelerating raising the income tax threshold to £10,000, a move championed by the Tories' LibDem Coalition partners.

And after the furore in the Conservative Party over gay marriage, the Chancellor may boost the married couples' allowance to cheer up disgruntled Tory backbenchers. A cut in corporation tax from 21p to 20p would also delight business leaders.

Mr Osborne is also expected to agree to unlock £4.8bn in child trust funds and allow parents to transfer their investments into more generous Junior ISAs. This move could leave some children up to £34,000 richer.

He will also announce that thousands of elderly people who lost up to half of their life savings when Equitable Life came close to collapse a decade ago will receive compensation.

But in a bleak message to MPs and voters on the state of the economy, there will be no U-turn on spending cuts or unfunded tax cuts and some grim economic forecasts.

Speaking at the weekend, the Chancellor rejected calls from Lib Dem Cabinet colleague Vince Cable and former Tory defence secretary Liam Fox to change course and abandon his so-called "Plan A".

Warning that economic recovery would be a slow process, he said: "There is no easy answer to Britain's problems. There is no miracle cure, because of course if there was a miracle cure it would have been deployed.

"It is just a lot of hard work dealing with Britain's debts, helping businesses create jobs and helping families who work hard and want to get on."

It has been revealed the Chancellor will unveil another £2.5bn of cuts to fund capital spending, although health, schools, overseas aid and HM Revenue and Customs will be shielded from the latest round of savings.

Osborne warned there would be no U-turn on spending cuts

Mr Osborne told the Cabinet other departments would have to find 1% savings on day-to-day budgets for each of 2013/14 and 2014/15.

But the move was attacked by Labour. Shadow Treasury Minister Chris Leslie MP said: "An increase in capital spending of just £2.5bn compares to deep cuts of £12.8bn to infrastructure investment in the last three years on the plans George Osborne inherited.

"If this is the only additional investment in infrastructure in the Budget it will be a huge disappointment. Business groups, the IMF and even Vince Cable have all said now is the right time to invest, at record low interest rates, in building homes, road and schools to create jobs now and strengthen our economy for the future.

"The test for the Budget is whether it delivers bold action to kickstart our flat-lining economy and significant tax cuts for middle and low income families, not a £3bn tax cut for the very richest and more of the same failing policies."

But only weeks after Britain lost its AAA credit rating and slipped into a double dip recession with the risk of a triple dip, Mr Osborne is expected to have to deliver more gloomy news about the country's finances.

The Office for Budget Responsibility is expected to raise borrowing forecasts and lower those for growth.

Confirmation of Mr Osborne's unpopularity comes in a survey suggesting that more than four out of 10 voters (44%) think he should be sacked as Chancellor.

Fewer than one in five (18%) of those questioned said Mr Osborne should keep his job, while 38% did not know.

Favourite to replace him is Mr Cable, favoured by 12%, followed by Foreign Secretary William Hague (5%) and Home Secretary Theresa May (3%).

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Facebook Scheme: Man 'Stole' $8M From Clients

A Florida investment adviser has been charged in New York in an $8m securities fraud scheme that exploited demand for shares of the social networking site Facebook.

Craig L Berkman, 71, was arrested on Tuesday at his home in Florida and detained pending a hearing set for Thursday.

He was charged with falsely claiming in December 2010 to own shares of Facebook Inc, well before the company went public last year.

In reality Berkman did not directly own shares, and prosecutors say he stole much of $8m (£5.3m) that more than 50 investors entrusted to him.

The US Securities and Exchange Commission has also announced separate civil charges.

The government said Berkman operated a private company called Ventures Trust II LLC.

Facebook went public in May with its much-hyped $104bn (£65bn) IPO.

But the company's value dropped soon after, with shares quickly falling from their debut price of $38 (£25.16).

On Tuesday the stock's value closed at $26.55 (£17.58).

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Cyprus Looks To Russia Amid Bailout Chaos

Sacrificing Trust In The Banks

Updated: 6:54pm UK, Tuesday 19 March 2013

By Ed Conway, Economics Editor

I'm rather glad that the Pope managed to mention Abraham in his inaugural mass today.

After all, of all the Old Testament, the tale of Abraham and Isaac is probably about the most comparable to the current imbroglio in Cyprus.

The father and guardian takes his son to the top of the mount, binds him and is on the point of sacrificing him when, at the last minute, God sends down an angel to stop him.

In an analogous way, the Cypriot government, on orders from on high (the eurogroup in this case, not God) has come to the brink of gouging an unprecedented tax out of its peoples' savings, and, at the last minute, seems to have been offered a reprieve.*

Now, if this were the Bible, the story would end there. Abraham's faith was tested, and he passed the test. Conveniently, the ancients glossed over the question of what this incident did to the father-son relationship.

However, this is not the Bible, and so we're left unpicking a relationship that has gone very wrong indeed. There is clearly a widespread sense of betrayal in Nicosia, and one can understand why.

Even if, as is the current plan, small savers with less than 20,000 euros in their accounts are let off the deposit tax, this episode will leave a lasting scar in place.

After all, the Government had spent the past few years insisting to savers that any deposits below 100,000 euros would be safe, protected by its deposit insurance scheme.

That it could subsequently play fast and loose with the bank accounts is unlikely to be forgotten.

Even if the Government were to stop short of a deposit tax, it's hard to see why savers wouldn't simply withdraw all their cash in droves when the banks reopen (whenever that is) – even if it's simply to put it underneath a mattress at home.

This episode has fatally undermined the element of trust in the banking system – something which is fundamental to the way capitalist economy functions in its current form.

Whether this triggers chaos elsewhere is difficult to predict. Markets have become more unsteady as the situation in Cyprus has deteriorated, but we haven't yet seen any kind of depositor panic elsewhere, for instance in Portugal and Spain.

However, the story in Cyprus is far from over. Anger is mounting, the parliamentary system is creaking under the weight of the demands coming over from Brussels, and the threats from Frankfurt to cut off emergency funding to the banks if the country doesn't co-operate haven't made them any more willing.

Short of a papal intervention, it's hard to imagine how to get a happy ending out of this story.

*Yes I know there are some inconsistencies. For instance, it's debatable whether the eurocrats have ditched the plan or whether it's simply being rejected by the government, the latter of which would be akin to Isaac breaking free of his bindings and escaping.

Plus, Isaac had not borrowed himself so far into penury that he was facing bankruptcy. Nor had he become a go-between for Russian tax avoiders but let's leave that aside for the time being.

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Cyprus Urged To Protect Savings Under 100k

Eurozone finance ministers have urged Cyprus to protect savers with less than 100,000 euros (£86,000) in their accounts from a proposed tax on bank deposits.

Under a bailout deal agreed with the EU, Cyprus planned to impose a levy of 6.7% on all savings below that level.

The scheme was then changed to a 6.7% tax on all savings between 20,000 and 100,000 euros and 9.9% on all savings over 100,000 euros.

But the finance ministers, known as the Eurogroup, said they favoured a higher, 15.6% tax on richer savers in order to protect those with smaller deposits.

A statement from the group's president Jeroen Dijsselbloem said: "The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors and reaffirms the importance of fully guaranteeing deposits below 100,000 euros."

Sparing more modest savers in favour of the higher rate on bigger deposits, would not impact on the overall amount of the bailout - 10bn euros (£8.6bn) - the group said.

Protesters gathered outside the parliament in Nicosia

On Saturday the Eurogroup told debt-ridden Cyprus it would not give it a bailout unless it recouped some of the money it needed from savers.

The scheme had the potential to affect thousands of Britons who had either moved to Cyprus to live or had money saved in Cypriot accounts.

Russia, whose citizens are thought to have up to $30bn of their cash tied up in Cypriot accounts, was left furious by the proposal.

Cyprus may still ignore the advice from the Eurogroup and its parliament is expected to vote on a plan to save its economy on Tuesday.

Foreign Secretary William Hague said Britain had been "separated" from contributing towards the bailout, adding that 3,000 Britons in the country would not suffer in the proposed raid on bank savings.

Large numbers of Russian millionaires have stashed savings in Cypriot banks

It is believed, however, that many British Cypriots may have millions in accounts that are not protected by UK rules.

It was also unclear whether British troops serving in Cyprus who had set up large savings accounts would be able to escape the tax.

Cyprus had been due to vote on the levy on Sunday but it was first pushed back until Monday and then Tuesday.

Banks were closed in the country on Monday because of a bank holiday, which prevented people withdrawing their money but cash machines across the island were emptied.

Branches will stay shut for another two days - Tuesday and Wednesday - to prevent people removing all their cash while the authorities decide what to do.

A large amount of cash was withdrawn from Cypriot banks on Monday

The decision to target bank accounts stunned Cypriots, and police sealed off parliament as about 400 people staged a noisy protest outside, aggrieved that their small island of one million people should be singled out for such treatment.

It is the first time within the EU that it has been proposed to tax savers in a country to pay for the failings of their government.

The euro and stock markets fell on concern that developments in tiny Cyprus could reignite the financial crisis in the 17-nation eurozone.

If Cyprus does tax large savers heavily there are fears that money could flood out of the country as two thirds of deposits are from abroad.

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