Brussels: Europe braced for renewed turmoil as outrage in Cyprus over an unprecedented levy on bank deposits threatened to derail the nation's bailout. European shares and the euro tumbled.

Cypriot President Nicos Anastasiades, who bowed to demands by euro-area finance ministers to raise €5.8 billion ($7.6 billion) by taking a piece of every bank account in Cyprus, appealed to lawmakers in Nicosia to ratify the levy. The vote was delayed from Sunday over the opposition of the European Central Bank (ECB) amid talks to restructure the tax.

While Cyprus accounts for less than half a per cent of the 17-nation euro economy, the raid on bank accounts risks triggering new convulsions in the financial crisis that began in 2009 in Greece. Moody's Investors Service said that the move is a significant step toward limiting support for bank creditors across Europe and shows that policy makers will risk financial-market disruptions to avoid sovereign defaults.

The tax is "a worrying precedent with potentially systemic consequences if depositors in other periphery countries fear a similar treatment in the future," Joachim Fels, chief economist at Morgan Stanley in London, wrote in a note.

Scenes of Cypriots lining up at cash machines raised the spectre of capital flight elsewhere and threatened to disrupt a market calm since the ECB's pledge in September to backstop troubled nations' debt. With no government in Italy, Spain in the throes of a political scandal and Greece struggling to meet the terms of its own bailout, more turmoil could hamper efforts to end the crisis.

The Euro Stoxx 50 Index fell 1.6 per cent and the euro slid as much as 1.9 per cent; the currency was trading at $1.30, down 0.9 per cent in Frankfurt. Borrowing costs in other debt-strapped nations rose. Italian 10-year bond yields climbed 13 basis points to 4.73 per cent, adding to last week's 10 basis point climb. The rate on similar-maturity Spanish yields jumped 14 basis points to 5.06 per cent, while Germany led gains among higher-rated nations' securities.

In a bid to ease a run on banks, depositors who keep their account for two years will receive securities linked to future revenue from the gas reserves.