European markets have fallen following uncertainty caused by the failure so far of Cyprus to ratify the €10bn bank bailout.
If the Cypriot parliament votes the deal down, the eurozone would face a real risk of being dragged back into crisis.
Cypriot President Nicos Anastasiades, a conservative elected just three weeks ago, has said the tax on deposits was an alternative to a disorderly bankruptcy.
In a televised address, Mr Anastasiades said it was painful but "will eventually stabilise the economy and lead it to recovery".
He said that savers who lost money would be compensated by shares in commercial banks, with equity returns guaranteed by future revenues expected from natural gas discoveries.
However, many legislators remain unconvinced.
The plan has led to Cypriots trying to withdraw their savings before a bailout is introduced.
Banks in Cyprus are closed today for a national holiday and it is thought they could remain shut tomorrow to avoid mass withdrawals.
EU sources have pointed out that any bailout deal must also be passed by the German lower house of parliament. Therefore, significant concessions to Cyprus are unlikely.
Bailout terms criticised
Meanwhile, Russian President Vladimir Putin has called the proposed Cyprus levy on banking deposits "unfair, unprofessional and dangerous".
Mr Putin is said to have held a special meeting to discuss developments in the debt-stricken Cyprus.
Russian banks and businesses have significant deposits in Cyprus.
Russian banks had about $12 billion (€9bn) placed with Cypriot banks and corporate deposits amounted to $19 billion (€15bn) at the end of 2012, according to Moody's rating agency.
Fianna Fáil finance spokesperson Michael McGrath has said that the burning of depositors in Cyprus sets a dangerous precedent across the eurozone and makes a mockery of plans for an EU-wide banking union.
Mr McGrath said that the so-called "tax" sends a clear signal that ordinary depositors are now in the firing line.
Despite comments from senior EU officials that Cyprus is a unique case, he said the move will undermine the confidence of investors in the eurozone and cause alarm to savers across Europe.
The White House is monitoring Cyprus' plans to seize money from bank depositors to secure the island's financial rescue, a White House spokesman said, but declined to comment further on the plan, which has rattled financial markets.
"We're obviously monitoring the situation right now," White House spokesman Jay Carney told reporters at a briefing.
"We believe it's very important for Europe to take steps necessary, as they have been, to both grow and deal with sovereign debt issues."
White House monitoring Cyprus' plans
The White House is monitoring Cyprus' plans to seize money from bank depositors to secure the island's financial rescue, a White House spokesman said, but declined to comment further on the plan, which has rattled financial markets.
"We're obviously monitoring the situation right now," White House spokesman Jay Carney told reporters at a briefing.
"We believe it's very important for Europe to take steps necessary, as they have been, to both grow and deal with sovereign debt issues."
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