Gavin Hewitt in Nicosia: "A day of deepening anger and anxiety"
The Cypriot economy is "on the brink" and desperately requires a liquidity lifeline from Europe, Cyprus's largest bank has warned.
"The next move may prove its salvation or destruction," said the Bank of Cyprus - itself said to require urgent funding to prevent collapse.
The European Central Bank has given the island nation until Monday to raise the funds it needs to secure a bailout.
Parliamentarians flatly rejected an earlier plan to tax bank deposits.
They need to agree on a new plan to raise 5.8bn euros (£4.9bn; $7.5bn) to qualify for a 10bn-euro bailout loan from the EU and International Monetary Fund (IMF).
“Start Quote
End QuoteThe country is surviving on a lifeline from the European Central Bank”
Political leaders discussed the options with President Nicos Anastasiades on Thursday, and the package is now reportedly being discussed by the cabinet. It will then go to a parliamentary vote.
If no "Plan B" can be found by Monday, the ECB may cut off funding to the island's banks, it said in a statement, triggering their collapse and possibly the country's exit from the euro.
Eurozone finance ministers are holding a phone conference on Thursday night to discuss the situation.
'Doomed'The country's two biggest banks, Bank of Cyprus and Laiki, are believed to be reliant on the ECB's Emergency Liquidity Assistance, provided via the Central Bank of Cyprus.
All Cypriot banks have been shut until next Tuesday to prevent mass withdrawals, but long lines have been forming at cash machines, which are still dispensing cash but are frequently running out.
At the scene
The fear is catching. Outside cash machines, queues have grown all day with savers worried about their money - particularly in the two most troubled banks. Rumours that they might be closed altogether only sparked more concern.
Elsewhere, businesses are demanding payment in cash, turning away credit cards for fear they won't get their money. It's led to a drop in business - with customers staying away.
This is the price Cyprus is paying for its current crisis. And the race is on to resolve it by next Monday when the European Central Bank says it will turn off its emergency funds. On Tuesday the banks will have to open here and that is when the queues could multiply unless a credible plan has been formed and Cyprus has raised its share of the bailout.
The coming hours are critical to save this troubled country and calm an anxious eurozone.
"There are rumours that Laiki Bank will never open again. I want to take out as much as I can," retired government official Phaedon Vassiliades told AFP news agency as he withdrew cash at a machine in the capital, Nicosia.
"I have nearly 60,000 euros as savings in this bank and some credit societies. I don't know if I will ever get it back now. This is what I had and now it seems it is all gone."
"We are doomed. Our sunny days are over," said Neophytos Constantinides, an insurance company employee.
State broadcaster CyBC said employees of Laiki - the country's second largest bank - were told on Thursday afternoon the bank would be closing down, but on state radio a Laiki spokeswoman denied those reports.
Crowds gathered outside parliament in anticipation of a vote on a new proposal - a key component of which is said to be the establishment of a state "investment solidarity fund" which would issue bonds to raise the 5.8bn euros required.
Other reported elements of "Plan B" could include restructuring Cypriot banks, use of pension funds, and accepting an offer of help from Cyprus' wealthy Orthodox church.
A revised levy on deposits also remains a possibility.
It might also contain some kind of Russian help. Cypriot Finance Minister Michael Sarris is in Moscow discussing possible assistance.
Big Russian investors are believed to hold about a third of all Cypriot deposits - and reacted with fury when the initial plan to tax deposits by up to 9.9%.
But the chairman of the Eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, told the European parliament that Moscow had indicated it was not willing to extend "another loan or an investment in the banks", Reuters news agency reported.
Reports suggest Moscow could consider buying interests in recently discovered offshore gas reserves.
But analysts point out that any revenue from such discoveries remains years off, and unnamed Turkish officials have been quoted as saying Ankara - which lays claim to some of the gas - would challenge any such arrangement.
The banking sector dominates Cyprus' economy and if a viable rescue is not organised soon the island state risks having to abandon the euro.
Cypriot banks were among the bondholders who had to take a big "haircut" in the second massive bailout for Greece.
Since 2008 the eurozone has been badly bruised by the massive bailouts provided for Greece, the Republic of Ireland and Portugal. There is a widespread reluctance to commit more EU taxpayers' money to ailing banks in southern Europe.
