By Nick Squires, Denise Roland, and agencies

Under the arrangement, depositors in Bank of Cyprus will receive shares in the lender worth 37.5pc of any savings over €100,000, while the rest may never be paid back, according to a statement from the Cypriot central bank.

Of the 62.5pc of uninsured deposits not converted to bank shares, about 40pc will continue to accrue interest but will not be repaid unless the bank does well, while the final 22.5pc will cease to attract interest.

Government figures, including finance minister Michalis Sarris and central bank governor Panicos Demetriades, had previously indicated that depositors in the island’s largest lender would lose around 40pc of their uninsured savings as part of an 11th hour agreement reached in Brussels in the early hours of Monday.

Meanwhile, account holders in Laiki Bank, the country’s second largest, stand to lose up to 80pc of their money as the lender is wound down and insured deposits transferred to Bank of Cyprus.

The harsher-than-expected terms on the Bank of Cyprus’ largest depositors are likely to provoke further anger among Cypriots, who face sharp economic decline with the contraction of their dominant banking sector.

Cypriot President Nicos Anastasiades, who has been in the job barely a month, said the risk of bankruptcy had been contained thanks to the bail-out but accused the 17-nation euro currency bloc of making “unprecedented demands that forced Cyprus to become an experiment”.

Amid a debate in Cyprus about a possible exit from the euro and a return to the Cypriot pound, the president said: “We have no intention of leaving the euro. In no way will we experiment with the future of our country.”

President Anastasiades said unprecedented restrictions imposed on bank transactions in Cyprus would be “gradually eased”.

The Central Bank of Cyprus later announced that there would be no limits on debit and credit card transactions or money transfers made inside the country, adding it will attempt to “refine or relax” its set of strict capital controls on a daily basis.

Overseas transactions would still be limited to €5,000, however, and daily cash withdrawals are capped at €300.

The government initially said the capital controls would stay in place for seven days, but Ioannis Kasoulides, the foreign minister, said on Thursday they could last “about a month”.

Many economists believe the government may be compelled to leave the restrictions in place for months or even years.

They point out that capital controls introduced in Iceland in 2008 to cope with its banking and economic crisis are still in place today.

The president said the immediate threat of bankruptcy had been thwarted. “The situation, despite the tragedy of it all, is contained,” he said.

But he conceded that the bailout deal would prove “painful”.

“Everyone will have to make sacrifices as our financial situation, in the violent way in which it has developed, will oblige all of us to share the burden,” he said.

There has been debate in Cyprus over whether the country would be better off leaving the euro and returning to its old currency, the Cypriot pound.

Earlier this week the head of the Orthodox Church in Cyprus said the euro was doomed and Cyprus would be better off going it alone.

“The euro cannot last. I’m not saying that it will crumble tomorrow but with the brains that they have in Brussels, it is certain that it will not last in the long term, and the best thing is to think about how to escape it,” said Archbishop Chrysostomos II.

But most bankers, business lobbies and politicians are opposed to the idea.

Andreas Pittas, a prominent businessman who owns a large pharmaceutical company, said a return to the pound would be disastrous. “It would simply ruin the business world of Cyprus. It would simply kill the economy,” he told The Cyprus Weekly newspaper.

Alexis Antoniades, an economist from Princeton University, said that returning to the Cyprus pound would be a problem because as an island, Cyprus imports most of its goods, and they would become more expensive.

But he said it should not be ruled out altogether. “Maybe defaulting on its euro debts and going solo with the Cypriot pound will help the economy regain its competitiveness and start from a clean slate. Going back to an independent currency may be the least painful of the various difficult operations.”

Banks opened as normal yesterday, a day after they had reopened after being shut for nearly two weeks to avert a run on deposits.

Outside a branch of Laiki Bank in Nicosia, Doros Kakas, a 50-year-old businessman who lived in London for more than 20 years, said he was one of the fortunate ones, having moved most of his savings to the UK some time ago.

“I’m lucky. Some people in Laiki have lost everything. I’m worried that Spain and Italy will go the way of Cyprus. Then what happens to France, Germany, England? Are we all going down?”