Cyprus Bailout: MPs Stumble Towards Deal

Cyprus Bailout: Threat To Savings

Updated: 7:36am UK, Saturday 23 March 2013

By Ashish Joshi, Sky News Correspondent

Finally late into Friday night - an agreement on Plan B, meaning Cyprus has moved one giant step towards securing a Brussels bailout.

It includes a solidarity fund pooling together state assets and the granting of power to the Government to control bank capital.

The latter move is to prevent a run on the banks when their doors finally open on Tuesday.

There will also be a restructuring of the country's banks and a savings tax on Cypriot savers.

The details of the tax have still to be finalised, but the framework is in place.

It could mean savings over 100,000 euros held in Bank of Cyprus accounts being taxed up to 20%, according to one source close to the negotiations.

The same source said if that proposal is rejected there will be a plan to impose a tax of around 10% on all Cypriot bank accounts over 100,000 euros.

The threat of savers being hit hangs over the heads of people like Loizos Michael.

The 60-year-old tailor worked hard for 35 years, building up a good business.

He was looking forward to a wealthy retirement. Not anymore. Times are hard.

Speaking from his small tailor's shop in central Nicosia, Mr Michael said: "With the banks being closed, it is hard because I don't have a credit card and so cash flow is a problem.

"Even filling your car with petrol needs thinking about.

"Cypriots have always been workers by nature and nobody could have imagined that unemployment would be so high.

"This has hit us hard in the pockets."

Cyprus is weathering a storm - the likes of which this Mediterranean island has never faced in her young history.

Mr Michael said he knew things were getting bad, but expected solutions to be found to avoid ordinary people having to suffer.

"I expected something better. But now, it looks like the problem has been brewing for some time," he said.

"There used to be some people talking about the crisis, but now everyone's talking about it.

"I think things are harder now than just after the war. After the war of '74 people could still find work. Now, there is just no work so people have no money. What can we do?"

In the 1990s, Cyprus boasted a dynamic, booming economy, but it grew and unchecked.

An overbloated banking sector exposed to Greek debt has crippled the country's economy.

Now people like Loizos Michael must pay the price. He and the rest of Cyprus will soon find out exactly how much that is going to be.

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Weather: Snow And Rain Continues To Batter UK

Britain is continuing to endure extreme winter storms as snow, rain, high winds and freezing temperatures affect large swathes of the country.

The severe weather, which has already claimed the life of one woman, has been extending south, affecting London and parts of Kent.

The Met Office has issued two amber warnings for snow, with Northern Ireland and Wales, parts of northwest and northeast England and the Midlands expecting to see up to 15cm of snowfall over the course of the day.

Tens of thousands of homes in Northern Ireland, Scotland and Cumbria remain without power, while many roads are impassable and runways have been forced to close.

Two amber warnings have been issued

Birmingham Airport has suspended all arrivals and departures due to heavy snowfall, while Leeds Bradford is experiencing heavy delays.

The AA has warned motorists that even short journeys may be difficult, and there could be a repeat of the scenes in southern England last week when hundreds of drivers were stranded in their cars overnight.

In stark contrast to yesterday, there are only two flood warnings, meaning flooding is expected, in place in Britain. Both warnings are for southwest England.

A further 91 flood alerts, where flooding is possible, remain in place across the South East, Anglia, the Midlands and Wales.

The rain has been a particular problem in Cornwall, where a landslide, thought to have been triggered by torrential rain, smashed through a block of flats, partially collapsing the building.

Emergency crews found a woman's body after picking through debris at the Veronica flats in Looe on Friday night.

The body is believed to be that of Susan Norman, who was in her 60s and had been unaccounted for, according to the police.

Sky weather presenter Isobel Lang said: "Southeast England, East Anglia, the Midlands, north Wales, northern England, Northern Ireland and much of Scotland can expect snow today.

A woman died when this house in Looe collapsed

"High ground will be worst affected with some heavy snow at times with drifting in the strong winds and also blizzards.

"Low levels could see 5cm to 10cm, two to four inches, of snowfall today although amounts will probably be lower across London."

She added: "Southwest England, south Wales and southern Ireland looks largely dry and relatively mild with some brighter spells.

"A few showers may nudge into the extreme southwest later. Tonight will stay dry with a frost forming in places."

Meanwhile, Electricity North West said about 1,500 properties in Cumbria remain without power but repair work was being held back by road closures, preventing access to some communities.

The company said it was considering using a helicopter to transport engineers to the areas to which power could not immediately be restored.

A complete blackout was reported for between 15 and 30 minutes across Belfast on Friday evening.

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Nasa Confirms Meteor After 'Fireball' Reports

A flash of light that streaked across the sky over the east coast of the United States was probably a single meteor, Nasa has announced.

"Judging from the brightness, we're dealing with something as bright as the full moon," said Bill Cooke, who works for Nasa's Meteoroid Environmental Office.

"We basically had a boulder enter the atmosphere over the northeast."

Mr Cooke said the meteor had been widely seen, with hundreds of reports on social media like Twitter as well as the website of the American Meteor Society.

Society official Robert Lunsford said it "basically looked like a super bright shooting star".

The flash in the sky was spotted as far south as Florida and as far north as New England.

Eyewitness Matt Moore said he had been standing in line for a concert in Philadelphia around dusk when he saw a "brilliant flash moving across the sky at a very brisk pace ... and utterly silent".

"It was clearly high up in the atmosphere," he said. "But from the way it appeared, it looked like a plane preparing to land at the airport."

Mr Moore said the flash was visible to him for about two or three seconds, and then it was gone. He described it as having a "spherical shape and yellowish and you could tell it was burning, with the trail that it left behind".

Derrick Pitts, the chief astronomer at Philadelphia's Franklin Institute, agreed that the sightings had all the hallmarks of a "fireball".

Mr Pitts said this one got more attention because it happened on a Friday evening - and because Twitter had provided a way for people to share information on the sighting.

He said what people probably saw was one meteor - or a "space rock" - that may have been the size of a volleyball falling fairly far down into the Earth's atmosphere.

He likened it to a stone skipping across the water - getting a "nice long burn out of it."

Mr Pitts said experts could not be 100% certain of what it was, unless it actually fell to the ground and they could track its trajectory.

But he said the descriptions by so many people were "absolutely consistent" with those of a meteor.

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Falklands: Thatcher Papers Reveal Tory Splits

Wide divisions within the Conservative Party over how the Government should respond to Argentina's invasion of the Falklands are revealed in Margaret Thatcher's private papers, which have been made public.

While the Tories publicly presented a united front in 1982, briefing notes prepared for the then Prime Minister demonstrate the polarised opinions in the early days of the crisis.

Until now the backroom deliberations have remained largely private but the notes are among those released by the Margaret Thatcher Archive Trust as it opens its files from a year which came to define her career.

They range from Ken Clarke, then a junior minister, arguing to "blow up a few ships but nothing more" to West Devon MP Peter Mills who warned "my constituents want blood".

'Great confusion and doubt' among Tories in the early days

Historian Chris Collins, from the trust, said the papers reflected the "chaos" within the party and more widely following the surprise attack.

He added: "These papers reveal how stressful this situation was, it was a massive undertaking which tested her to the full.

"In the early days of the conflict there was great confusion and doubt on behalf of the party and more widely.

"People were feeling very down about the whole process and what was going to happen next. There was tremendous chaos.

"But of course a party has to show a united face as far as it can."

"My constituents want blood," said West Devon MP Peter Mills

On April 6, four days after the invasion, the Chief Whip, Michael Jopling, prepared a note for the Prime Minister saying: "You may like to have general reaction to events in the Falkland Islands."

Mr Clarke, along with Sir Timothy Raison, MP for Aylesbury, are attributed with the view: "Hopes nobody thinks we are going to fight the Argentinians. We should blow up a few ships but nothing more."

Lady Thatcher has marked the comment with two blue biro lines.

Sir John Page was said to be "desperately depressed" by the situation and Ian Gilmour, later Baron Gilmour of Craigmillar, said: "We are making a big mistake. It will make Suez look like common sense."

Ken Clarke wanted to 'blow up a few ships' but nothing more

Five MPs urged Lady Thatcher to "keep calm" adding "we can get away without a fight" while others were "all taking a hard line".

A similar note the following day described Stephen Dorrell as "very wobbly".

It adds: "Will only support the fleet as a negotiating ploy. If they will not negotiate we should withdraw."

Meanwhile, referring to Keith Stainton, the note reads: "Intends to attack the Government. His wife has large interests in the Falklands."

Some MPs thought military action 'a big mistake'

Lady Thatcher is the first British Prime Minister whose private and official papers have been released in this way.

Charles Moore, her authorised biographer, said: "The Thatcher archive is a marvellous resource for all those interested in her career as Prime Minister and in this country's recent political history.

"This release will provide the raw material to help researchers study and understand the changing political landscape of her first year as Prime Minister."

The latest release is open to the public at the Churchill Archive Centre in Cambridge and is available online.

Mrs Thatcher was broadly supportive of Prince Andrew's involvement

:: A hand-written note by Lady Thatcher, prepared after April 2, 1982, possibly in preparation for a speech or press conference, shows that she settled on a brief but broadly supportive position on the Duke of York's deployment as part of the Falklands task force.

"If asked about Prince Andrew it is the express wish of The Queen, the Duke of Edinburgh, and of Prince Andrew himself, that if the Invincible sails he sails with her," it says.

:: The papers mention an early meeting with Robert Mugabe, who had been elected as Prime Minister of Zimbabwe in 1980 and was then still considered a hero by many after his role against white-minority rule.

At a lunch held in his honour on May 19, 1982, Lady Thatcher praised him for his "friendly and open manner".

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Child Smokers: Thousands More Take Up Habit

The number of children who have taken up smoking has risen by 50,000 in just one year - the equivalent of 567 a day.

About 207,000 children aged 11 to 15 started to smoke in 2011, a sharp rise from 157,000 in 2010, Cancer Research UK said.

Almost one in three (27%) of under-16s have tried smoking at least once, a study by the charity found.

It urged the Government to commit to having all cigarettes put in plain standardised packs.

Sarah Woolnough, executive director of policy and information at Cancer Research UK, said: "With such a large number of youngsters starting to smoke every year, urgent action is needed to tackle the devastation caused by tobacco.

"Replacing slick, brightly-coloured packs that appeal to children with standard packs displaying prominent health warnings is a vital part of efforts to protect health.

"Reducing the appeal of cigarettes with plain, standardised packs will give millions of children one less reason to start smoking."

Last April, the Government launched a consultation on plans to introduce mandatory standardised packaging for tobacco products.

Health campaigners have welcomed the proposal, although opponents claim it would lead to increased smuggling and job losses.

Information generated by the consultation, which closed in August, is still being analysed by health officials.

In December, Australia became the first country in the world to put all tobacco products in standardised packs.

Cigarette packets and other products are all sold in a standardised colour, with only the brand name and graphic warnings visible.

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Snow And Floods: Drivers Warned Of Disruption

Severe weather warnings have been issued across much of the country with large amounts of snow expected in many parts after a night of rain caused major flooding.

Up to 40cm (16ins) of snow was expected over high ground in the Midlands, north and east Wales and northwest England, with 10-15cm (four to six ins) in lower lying areas.

Heavy snow was also expected in Northern Ireland with up to 30cm (12ins) predicted across the hills of counties Antrim and Down, with high winds leading to blizzard conditions.

The snow is expected to continue into Saturday with the Met Office saying another 5-10cm (4-6ins) was possible in some areas of central Britain.

It prompted the Met Office to issue two amber warnings for snow, meaning that the public in some places should be prepared for "severe disruption, particularly to transport and power supplies".

More than 40,000 homes and businesses in Northern Ireland are without power because of storm force winds and snow. Around 60 schools have also been closed.

Amber alerts have been issued for snow and rain

George Best City Airport said its runway was closed, while Belfast International Airport warned that the weather could cause some disruption to flights.

Leeds Bradford International Airport has suspended all flights due to "adverse weather conditions".

The airport has told passengers: "We advise you contact your airline or tour operator and check the status of your flight before arriving at the airport."

Heavy overnight snow has caused severe traffic problems and school closures across West Yorkshire.

Among the main roads affected in the region are the A1(M) between the end of the M1 and the A62 junction, between Leeds and York, where snow has closed a lane, and the M62 near Brighouse, where another lane has been closed due to the weather.

Dozens of schools closed across Yorkshire, Derbyshire and Nottinghamshire.

Shops and homes were flooded in Cornwall overnight, as the AA warned motorists even short journeys "can quickly turn bad".

In addition, there were 96 flood warnings in place across the country, with southwest England the worst affected.

Snow in Derwen (Pic: Geraint Evans)

Seventeen flood warnings, meaning flooding is expected, were in place, affecting Devon and Dorset.

And 79 flood alerts, where flooding is possible, were in place across the South East and Midlands, but the South West is likely to be the hardest hit.

Police said they received a "significant" surge in call-outs on Thursday evening in the South West.

Sgt Dave Opara, based in Plymouth, said: "There has been a considerable amount of rainfall across the force area."

Cornwall opened its dedicated control centre to deal with the volume of calls about flooding. Fire crews had already been called out to 50 incidents before 10pm on Thursday.

Newlyn, in the southwest of the county, was reported to be the worst affected area.

Newlyn resident Adam Gibbard said the river through the town had burst its banks and swept into the main street.

"This is the second time it has happened in three months and a lot of these properties are businesses who were just getting back on their feet," he told Sky News.

"It has been very heavy rain all day and the deepest areas are a couple of feet deep.

"There are a lot of people out with sandbags, there are a lot of fire crews, people pitching in and trying to stem it but I don't think they have much of a chance."

The worst flooding was reported to be around Newlyn in Cornwall

Environment Agency spokesperson Pete Fox said: "Heavy rain in southwest England and south Wales on Thursday and into Friday means there is a risk of localised surface water and river flooding in the south west, the southern counties and parts of south Wales.

"The public can sign up for flood warnings and check the latest information on the Environment Agency's website, or follow us on Twitter at @EnvAgency."

Sky News weather producer Joanna Robinson said: "March can be a month of extremes and that's certainly what we're seeing this year.

"The cold theme is set to continue, with disruptive snow across parts of the UK.

"Over the next 24 hours, central parts of the UK will be most at risk of significant snow, particularly Northern Ireland, southwest Scotland, northwest England, northeast Wales and the north Midlands.

"There will be drifting in the raw wind and blizzard conditions. Disruption is likely to transport and perhaps even power supplies."

Darron Burness, head of the AA's Special Operations Response Team, said: "It's going to be a real witch's brew of driving wind, rain and snow, which will inevitably cause disruption on the roads.

"Drivers should be well prepared as even short journeys can quickly turn bad.

"Drifting snow could repeat the scenes we saw in southern England last week when hundreds of drivers got stuck overnight - it only takes one or two vehicles struggling for grip for the situation to quickly escalate.

"Keep your speed down as visibility could be seriously reduced and there's a risk of localised flooding - just stay out of flood water.

"Also with temperatures set to remain low, any snow that settles will likely persist for several days, so be wary of icy patches.

"Wherever you're going, take plenty of warm layers, check the travel reports before heading out and stick to the main roads where possible."

The Local Government Association said council gritting and ploughing teams would be out in force to try to ensure main roads remained passable.

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North Korea Issues Fresh Threat To America

By Mark Stone, Asia Correspondent

North Korea has threatened to attack American airbases on the Japanese island of Okinawa and the Pacific island of Guam.

A statement by Kim Yong Chul, the spokesman of the Supreme Command of the Korean People's Army warned of "military actions".

"The US should not forget that the Anderson Air Force Base on Guam where B-52 bombers take off and naval bases in Japan and Okinawa where nuclear-powered submarines are launched are within the striking range of the Democratic People's Republic of Korea (DPRK) precision strike means," the statement read.

"Now that the US started open nuclear blackmail and threat, the DPRK, too, will move to take corresponding military actions."

The words mark the latest escalation in a lengthy stand-off as North Korea defies calls from the rest of the world to halt its dual nuclear and ballistic missile programmes.

The American government has not yet responded to the threat.

Military guard posts of South Korea (front) and North Korea (far)

British diplomatic sources speaking to Sky News from Seoul have said the UK Government "takes any threats seriously and there is some concern over the more harsh rhetoric coming from the DPRK".

However, the source insisted that there was no panic or alarm among diplomatic circles and that UK travel advice to South Korea remains unchanged.

The latest threat from North Korea is a direct response to a series of joint military exercises involving the US and South Korea.

On Tuesday, the US Air Force deployed its giant B-52 bombers from their base on Guam. The planes, which are capable of carrying and deploying nuclear bombs, flew sorties over the Korean peninsula as part of the military exercise.

The Pentagon in Washington confirmed the B-52 deployment. Spokesman George Little said the US wanted to underline its commitment and capacity to defend South Korea against an attack from the North.

However, the flights were condemned by Pyongyang as "an unpardonable provocation".

The Pentagon has confirmed the B-52 deployment

"The US is introducing a strategic nuclear strike means to the Korean peninsula at a time when its situation is inching close to the brink of war," the North Korean statement added.

The North Korean military does have rockets capable of reaching both Okinawa and Guam.

The surprisingly successful rocket launch in December followed a trajectory similar to that which any strike against Okinawa would take.

Okinawa is 600 miles due south of the Korean peninsula. Guam is further away, to the east of the Philippines.

While Pyongyang has proved it has the range capability, it is not clear whether or not their missiles are accurate enough to hit a specific target. And the country does not yet have the ability to carry out a nuclear strike at this range.

Earlier this month, the UN imposed the toughest sanctions yet on North Korea.

Kim Jong-Un reacted with anger, threatening to attack America, South Korea and Japan. The young and unpredictable leader toured military units calling for them to prepare for 'all out war'.

Computers are seen down at the main office of broadcaster YTN in Seoul

Meanwhile, Wednesday's unusually large cyberattack in South Korea, which brought down banks and broadcasters for one hour, has been traced to China.

Experts in Seoul claim the simultaneous attacks all bore the same IP address which was traced to the Chinese mainland.

Many of North Korea's internet and computing operations are tied to China. There is no suggestion that the Chinese government had any involvement.

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Australia: Julia Gillard Challenge Called Off

Australian Prime Minister Julia Gillard has retained the leadership of the Labor party just hours after she was urged to hold a ballot.

Ms Gillard ensured she will lead the party into elections in September after her main rival Kevin Rudd admitted he did not have enough support to defeat her.

The prime minister called the vote after a senior MP said the issue was "killing" the party and needed to be resolved.

The vote was scheduled for 16:30 (05:30 GMT), but minutes before it was due to take place Mr Rudd pulled out, meaning Ms Gillard was elected unopposed, with no actual vote called.

She said: "Today the leadership of our political party, the Labor Party, has been settled and settled in the most conclusive fashion possible.

"The whole business is completely at an end. It has ended now."

Mr Rudd said he was honouring a pledge not to challenge for the top job made after a previous failed bid in 2012.

He said: "I believe in honouring my word... others take such commitments lightly, I do not.

"I have also said that the only circumstances under which I would consider a return to leadership would be if there was an overwhelming majority of the parliamentary party requesting such a return, drafting me to return and the position was vacant.

"I am here to inform you that those circumstances do not exist."

Polls suggest Mr Rudd has more public support than Ms Gillard, who is on course to lose the election to Liberal Party candidate Tony Abbott.

The latest crisis is the third time the prime minister has defeated Mr Rudd for the leadership, but she now faces a tough job to unify a deeply-divided party and turn around public support over the next six months.

"I think they're terminal. There is no way out of this," political analyst Nick Economou told Reuters.

Ms Gillard's leadership has been threatened for most of the past two years as her minority government lumbered from one crisis to another, despite an economy that avoided recession after the 2008 global crisis and has seen 21 years of continuous growth.

She first replaced Mr Rudd in a party coup in June 2010 but the move to oust an elected prime minister angered many voters, who have found it difficult to forgive her for the way she became leader.

Ms Gillard defeated Mr Rudd in a second leadership vote in February 2012, prompting her rival to promise that he would only take on the leadership again with the overwhelming support of his party.

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Budget: George Osborne Defends Economic Plans

George Osborne has defended his Budget as he pointed to Cyprus and warned Britain's problems "could be a lot worse".

In an interview on Sky News, the Chancellor insisted the public understood he had to take tough decisions to secure the country's future.

"People know that it is a difficult situation out there but it is a situation that could be very much worse for Britain if we didn't take these decisions," he said.

Labour has attacked his "aspiration nation" Budget, warning that it does not do enough to boost growth and calling for a U-turn.

Shadow chancellor Ed Balls, writing in the Daily Mirror, said: "What we needed yesterday was a change of direction, action to kickstart our flatlining economy and real help for people on middle and low incomes.

"But what we got was more of the same failing policies and a huge tax cut for millionaires. Britain deserves better than this."

But the Chancellor accused the Opposition of having no "serious economic alternative" and resorting to "personal abuse" instead of setting out its own plans.

George Osborne on Sky News on Thursday

He told Sky News: "It is a tough economic situation and of course if it is a difficult job dealing with that situation but it is a job the whole British people is facing at the moment.

"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."

MPs will debate the detail of the announcements in the House of Commons later.

Centre to Mr Osborne's plans are moves to stimulate the housing market in the hope this will stimulate economic recovery.

The Government will plough billions into boosting home ownership by underwriting the mortgages of hundreds of thousands of people.

Interest-free loans lasting five years and worth up to 20% of the value of new build homes under £600,000 will be available.

And from next January, taxpayers' money will be used as a guarantee for home buyers who can only pull together small deposits.

Mr Osborne claimed on Thursday that the measures would help boost the flat housing market and provide jobs in construction as new homes were built.

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."

In his Budget, there were further tax breaks for drinkers, drivers and working parents.

There was a 1p cut in the price of beer as the beer duty escalator was also scrapped, and a planned fuel duty hike was cancelled.

Small businesses will be boosted by a new employment allowance which will save employers £2,000 on their National Insurance bills.

Ed Miliband and Ed Balls condemned the Budget as "more of the same"

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.

Labour condemned Mr Osborne as a "downgraded Chancellor" who was simply offering "more of the same" and some experts criticised him for not going far enough to boost growth.

Research for consumer group Which? carried out immediately after the Budget found 89% of voters backed the rise in the personal tax allowance and 87% supported the fuel duty move.

But it also suggested that a third of the public now feel less confident about the prospects of the economy this year, and 28% feel less confident about their own finances.

Some 59% said the Government should rethink its economic plan and 44% expect their personal finances to worsen over the coming year.

In another blow to Mr Osborne, hours after his Budget was delivered peers inflicted a major defeat on the Government over its "shares for rights" plan.

Former Civil Service chief Lord O'Donnell linked the plans to slavery and ex-Tory minister Lord Forsyth of Drumlean said they were "ill-thought through, confused and muddled".

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Al Qaeda Says It Beheads French Hostage

Al Qaeda says it has beheaded a French hostage in reprisal for France's military intervention in Mali, according to reports.

Its North African arm claimed responsibility, Mauritania's ANI news agency reported, citing a commander for the group.

A French foreign office spokesman said they were trying to verify the report of the killing of Philippe Verdon, adding that "we don't know at the moment" whether it is reliable.

In a telephone call to the news agency, the group spokesman said Mr Verdon had been beheaded on March 10 "in response to the French military intervention in the north of Mali", ANI reported.

The AQIM commander described Mr Verdon as a French spy and said France's President Francois Hollande "bore the responsibility for the remaining hostages".

Mr Verdon and another Frenchman, Serge Lazarevic, were kidnapped from their hotel room on November 24, 2011, in the northern Mali town of Hombori.

Their families denied that the two men were mercenaries or secret service agents.

It is not known whether Mokhtar Belmokhtar is dead or alive

The killing, if proved true, would be a worrying development for Mr Hollande.

Another 14 French hostages are detained in Western Africa, including seven believed to be held in the Sahel region by al Qaeda in the Islamic Maghreb (AQIM) and its affiliates.

In August last year a video showing Mr Verdon describing the "difficult living conditions" was released on a Mauritanian website.

The hostages' families have in recent weeks expressed growing fears for their loved ones in the light of France's military actions in Mali.

Earlier Tuesday, Mr Verdon's father Jean-Pierre, complained that the families were hearing nothing from the French authorities.

"We are in a total fog and it is impossible to live this way," he told RTL radio. "We have no information."

French soldiers on the ground in Timbuktu

Asked about France's refusal to pay ransoms to kidnappers, he replied that the families had no say in such "decisions of state".

Terror chief Mokhtar Belmokhtar, an AQIM leader and one of the world's most wanted men, had pledged revenge and vowed to attack western targets in Africa after France launched a campaign to help the country's embattled government drive Islamist militants out of northern Mali.

France now has more than 4,000 troops on the ground in Mali.

It launched a nine-week assault in January to dislodge the group and other Islamist militants who had hijacked a Tuareg rebellion in Sahel and seized the northern half of the country.

They were driven out from the main cities of Gao, Timbuktu and Kidal, after which some 1,600 French and Chadian troops began searching for Islamist rebels in their pocket hideouts in the mountainous region of northern Mali.

When asked by the ANI news agency whether Belmokhtar had been killed, the AQIM commander neither denied nor confirmed it.

There have been conflicting reports on whether he was killed in the French military campaign against the rebels.

Soldiers from Chad fighting Islamists in Mali had claimed to have killed Belmokhtar, who is said to have been the mastermind behind the recent Algerian hostage crisis at a remote gas facility in the Algerian desert.

The one-eyed gangster, nicknamed Mr Marlboro because of his involvement in cigarette smuggling, had also been dubbed "The Uncatchable" by French intelligence after being linked to a series of kidnappings of foreigners in north Africa over the past decade.

France has been carrying out DNA tests to determine whether militant leaders Belmokhtar and Abdelhamid Abou Zaid are among those killed in recent fighting in Mali.

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Australia: Stranger Saves Girl In Supermarket

A builder has been praised after he resuscitated a child who had collapsed and stopped breathing while out shopping with her mother in Australia.

CCTV footage shows two-year-old Shaylar's mother, Amy Collard, carrying her to a counter of a Perth supermarket to plead for help after she had lost consciousness before running outside to find her husband, Michael Narkle.

A couple, including tradesman Rowan O'Neill, can then be seen rushing to help the stricken girl - and fearing she was choking, Mr O'Neill turned her upside down in an effort to revive her.

 When Mr Narkle enters the store, he can be seen breaking down before he and Mr O'Neill try to save Shaylar by shaking her, patting her on the back and attempting the Heimlich manoeuvre.

When this fails, Mr O'Neill begins mouth-to-mouth resuscitation - and after 90 seconds the girl opened her eyes, local media said.

The toddler's parents told A Current Affair they were grateful to Mr O'Neill for saving their daughter's life.

Ms Collard said: "I thought she was going to die. I'm lucky that he was there."

"Thank you very much," Mr Narkle added.

Local TV stations have reported that doctors thought Shaylar's fever caused her to pass out and she was back at home after one night in hospital.

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Budget: Osborne Vows To Help People 'Get On'

By Jon Craig, Chief Political Correspondent

George Osborne has vowed to help people "work hard and get on" as he prepares to deliver the most important Budget of his career.

The Chancellor joined Twitter hours before the financial statement, which comes as he is under intense pressure over the lack of growth.

A Twitpic shows George Osborne at work

Posting a picture of himself at work with his red box, he wrote: "Today I'll present a Budget that tackles the economy's problems head on helping those who want to work hard & get on."

Mr Osborne will this lunchtime unveil a Budget that has the twin aims of trying to rescue the British economy and the political fortunes of the Conservative Party.

He 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 Tories blame 2012's "omnishambles" statement containing a series of blunders that required embarrassing U-turns for the collapse in the party's support.

Further questions have been raised about the Chancellor since Britain lost its AAA credit rating and slipped into a double dip recession, with the risk of a triple drip still alive.

Labour leader Ed Miliband warned on Wednesday that Britain did not want "more of the same". "What we don't need is him saying I'm going to stick to my failed plan," he said.

But despite lower growth forecasts and a rise in borrowing set to be confirmed in the statement, Mr Osborne is expected to insist there can be no shift from austerity.

He has already promised help for pensioners, working couples and homebuyers but will also need to tackle fuel duty and encourage businesses to invest to avoid another onslaught from critics.

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' Lib Dem 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.

And he will 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.

Mr Osborne has defied 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."

Most government departments have in fact been ordered to cut another 2% from their budgets over the next two years so that the money can be spent on capital projects.

Health, schools, overseas aid and HM Revenue and Customs will be shielded from the latest round of savings, which will give a £2.5bn capital boost.

The Budget comes as a new poll confirmed Mr Osborne's unpopularity.

The survey suggested 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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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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Roache: Abuse Victims 'Punished For Past Sins'

The actor who plays Coronation Street's Ken Barlow has seemingly claimed victims of sexual abuse are being punished for their behaviour in "previous lives".

Bill Roache made the comments in a television interview, during which he said famous men can be "caught in this trap" by young female fans who follow their movements.

Speaking to New Zealand's TVNZ, he said of the victims: "If you accept that you are pure love ... and therefore live that pure love, these things won't happen to you."

He was then pressed by reporter Garth Bray, who asked: "To some people that sounds perhaps like you're saying victims bring things on themselves. Is that what you're saying?"

Michael Le Vell arrives at court

The 80-year-old replied: "No, not quite, but then yes I am. Everything that happens to us is the result of what we have been in previous lives."

Roache's co-star of 30 years, Michael Le Vell, has been suspended from the ITV soap after he was charged with 19 child sex offences.

Le Vell, whose real name is Michael Turner, appeared in court last month and was bailed until his next appearance in the dock at Manchester Crown Court.

During his interview with TVNZ, Roache insisted: "Everyone's innocent until they're proven guilty."

He described paedophilia as "absolutely horrendous" but added: "There's a fringe here ... particularly pop stars who have these groupies, these girls, who are sexually active and sexually mature.

"They don't ask for their birth certificate and they don't know what age they may be.

"They're certainly not grooming them and exploiting them but they can be caught in this trap."

He added: "These people are instantly stigmatised. Some will be innocent and some will not, but until such time as (any offence) is proven, there should be anonymity for both.

"If someone has done something wrong, the law should take its course. But whether they're proven guilty or not, we should never be judgemental about anyone.

"We shouldn't go round condemning. We should be forgiving about everything."

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Pope Francis Officially Starts Papacy

Francis has officially begun his ministry as the 266th pope, receiving the ring and pallium symbolising his new papal powers at a grand ceremony in St Peter's Square.

A cardinal intoned the rite of inauguration at the start of the Mass, saying "The Good Shepherd charged Peter to feed his lambs and his sheep; today you succeed him as the bishop of this church."

Later six cardinals approached the Argentine-born pope to vow their obedience.

The Pope kissed several babies as he toured the square

The Mass is being held in sun-drenched St Peter's Square before tens of thousands of people, including 132 world leaders. The Queen and Prime Minister David Cameron are absent.

The pallium is a strip of lambswool that represents the pope's role as a shepherd and the Fisherman's Ring is named in honour of the first pope St Peter, a fisherman by trade.

The Fisherman's Ring

Before the lavish ceremony started, Francis toured a crammed St Peter's Square, where he kissed babies and blessed a disabled man.

In another sign of the informality that is already a mark of his papacy, Francis abandoned the bullet-proof popemobile frequently used by his more formal predecessor Benedict, to tour the sprawling square in bright sunshine.

Crowds had been pouring into the square and surrounding streets since before dawn.

Francis, who was elected by a secret conclave of cardinals last Wednesday, stopped frequently to greet the crowd and kiss babies held up to him.

He got out of the vehicle at one point to bless a disabled man.

The Mass, which started at 8.30am, GMT, formally installed  Francis as the new leader of the world's 1.2bn Roman Catholics.

The crowds had begun gathering from the early morning

The crowd may be the biggest in Rome since more than 1.5m people came to the city for the beatification of the late Pope John Paul II on May 1, 2011.

The Vatican said the Mass would be a simplified version of events in 2005 that brought Pope Benedict XVI to the papacy.

He will receive the visiting political leaders in the basilica after the Mass.

Argentina's President Cristina Kirchner will be among those present for the inauguration.

Francis abandoned the bullet-proof popemobile

She met the Pope at the Vatican on Monday in what had the potential to be a tense meeting.

She and her predecessor and late husband, Nestor Kirchner, defied church teaching to push through a series of measures with popular backing in Argentina, including mandatory sex education in schools, free distribution of contraceptives in public hospitals and the right for transsexuals to change their official identities on demand.

In 2010, Argentina became the first Latin-American country to legalise same-sex marriages.

But today those differences appear to have been brushed aside. Kirchner gave the Pope a mate gourd and straw to hold the traditional Argentine tea that the new leader of the Catholic church loves. To her surprise, she got a kiss in return.

"Never in my life has a Pope kissed me!" Ms Fernandez said afterward.

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Cyprus Bailout: Savings Tax Could Be Cut

Officials in Cyprus are reportedly trying to renegotiate a eurozone bailout deal in order to soften the impact of a levy on smaller savers.

Authorities had planned a 6.7% tax on deposits under 100,000 euros (£85,454), triggering queues at cash machines as people in Cyprus rushed to withdraw their money.

But the country's government is thought to be discussing cutting the tax rate to 3% while raising the rate for deposits over 100,000 euros from 9.9% to 12.5%.

In exchange for the levy, Cyprus will receive 10bn euros (£8.54bn) in aid to help recapitalise banks.

Cypriot President Nicos Anastasiades held talks with his cabinet

World markets have reacted negatively this morning, with many losing more than 2% and the FTSE dropping 1.6%.

Cypriot President Nicos Anastasiades, who was elected just three weeks ago, said the island had to accept a painful compromise or face bankruptcy.

In a televised address, he said the bailout "will eventually stabilise the economy and lead it to recovery".

Monday is a national holiday in Cyprus and measures need to be approved before banks open again on Tuesday.

Depositors in the eurozone's weaker economies have been unnerved by the levy, with investors fearing it will set a precedent that could reignite market turmoil.

Their uncertainty could be reflected when European markets open later, with the euro having already seen sharp falls in Asia.

British government and military personnel in Cyprus will be protected from any levy on their bank deposits.

Foreign Secretary William Hague told Sky News that 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.

The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn).

Savers have queued to withdraw their money from cash machines across Cyprus

Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island, as well as Cypriots themselves.

The size of foreign deposits in Cyprus - estimated at 37% of the total - was one reason the eurozone agreed to the tax on savings.

It will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the European Central Bank.

It will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.

However, Laiki Bank UK said on its website: "Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro (£87,000) by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.

"Any deposits you hold above the 100,000 euro limit are not covered."

Cypriot banks lost 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product - when eurozone leaders decided to write off Greek debt last year.

As part of its bailout deal, corporate tax will rise from 10% to 12.5%, while state assets will be sold off to help balance the public finances.

Cuts to government worker salaries and pensions have already been approved.

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Leveson: Parties Reach Press Regulation Deal

Politicians have reached a deal on plans to create a tough new press regulator, Labour's deputy leader Harriet Harman has told Sky News.

However, a Downing Street source insisted cross-party agreement was "very close", and there would be further talks this morning.

The details are expected to be revealed in the House of Commons later, but it appears a Royal Charter will be created, underpinned by law, so that it cannot be watered down or changed.

Asked if a deal was as good as done, Ms Harman said: "Yes, agreement has been reached.

"I think it's incredibly important that really for the first time we'll have a proper complaint system. The press will still be a free press - that is absolutely essential in a democracy.

"But also victims of press abuse, if the press overstep the mark, invade people's privacy, turn people's lives upside down in the way they have to people like the Dowlers and the McCanns, there will be a proper complaint system with an independent complaints panel which will have proper teeth to require proper corrections and apologies.

"So I think it is a very, very good agreement that has been reached. So probably there won't be a vote in the House of Commons this afternoon. It will be discussed, But I think, really, all sides are going to be agreeing to it."

The Conservatives, Labour and the Liberal Democrats are understood to have held talks for more than five hours.

David Cameron - faced with a possible defeat in a House of Commons vote on the issue - was not present but was represented by Oliver Letwin, who has been the key figure for the party in recent negotiations.

The eleventh-hour talks came after Culture Secretary Maria Miller hinted at a "Labour climb-down", claiming Ed Miliband's party was now "much closer" to the Tories' position.

But Labour claimed the deal would be based on their plans for a Royal Charter underpinned by law.

Mr Cameron has been clear that he is very uncomfortable with the idea of setting anything down in law because it could be seen as politicians meddling with the press.

However, it is understood a compromise has been reached to include three lines of Statute - a clause in the legislation to ensure that the Royal Charter can not be amended in the future without two-thirds majorities in both Houses of Parliament.

There will be no industry veto of who sits on the regulator, and there will be a specific rule to ensure apologies are proportionate.

Mr Cameron, who last week pulled out of talks about implementing Lord Justice Leveson's recommendations, previously warned that legislation would endanger press freedom.

Labour leader Mr Miliband, Deputy Prime Minister Nick Clegg and Ms Harman attended the talks.

Actor Hugh Grant, who is leading the Hacked Off campaign for tighter controls in the wake of the hacking scandal, has accused the Prime Minister of turning his back on victims of press intrusion.

Harry Potter author JK Rowling has also spoken out, saying Mr Cameron's actions had left her feeling "hung out to dry".

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David Hockney: Artist's Assistant Dead

A man has died in hospital after being taken there from the home of artist David Hockney in Bridlington, say Sky sources.

It is understood that the man was 23-year old Dominic Elliott, a close friend and assistant of Mr Hockney.

He was taken to Scarborough hospital at 6am on Sunday.

Hockney, 75, is considered an important contributor to the 1960s' Pop art movement and one of the most influential British artists of recent times.

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Police Arrest 60 Ahead Of Football Match

Police have arrested more than 60 people for alleged violent disorder in Nuneaton in the hours leading up to a football match against Lincoln City.

The disorder broke out in a number of pubs in the town centre ahead of the non-league fixture on Saturday.

Officers from Warwickshire Police, West Mercia Police, West Midlands Police and British Transport Police were deployed in the town shortly before 10.30am in response to reports of disorder at a number of licensed premises.

Police began arresting dozens of people on suspicion of violent disorder at The Granby pub from 3.20pm.

The suspects were transported by coach to Nuneaton police station and held in custody for questioning.

Chief Inspector Adrian Knight, who was in charge of the response, said officers from all police units involved were "successful in containing the disorder and protecting the safety and well-being of the general public".

"This operation was a true collaboration utilising resources from across the region.

"I am extremely grateful to our regional colleagues from West Mercia, West Midlands and British Transport Police for their support in this operation. It has been a particularly challenging day.

"Warwickshire Police is committed to protecting people from harm, whether they live in the county or are visiting, and we will not tolerate any behaviour which puts them at risk.

"Anyone intent on causing trouble in Warwickshire should be aware that we will deal with them robustly."

He added: "The fact that 62 people have been arrested is testament to our commitment to tackle violence and disorder within the county."

Nuneaton Town chief executive Ian Neale said the trouble was nothing to do with the football club or its supporters.

He said police went to The Granby pub to organise an escort to town for Nuneaton fans, but only three people said they were interested in going to the match.

"They were allowed to leave the pub to take a taxi to the ground, which is two miles away from where the arrests were made," said Mr Neale.

"The Boro is a family club and people who are looking for trouble are not welcome at our ground. Anyone found guilty of any offences today will be banned from the ground for life."

He added:  "The club works tremendously hard on community programmes to give young people locally aspiration and opportunities in a working class town and we see ourselves very much part of making positive things happen for the town."

Nuneaton went on to win the Blue Square Bet Premier League fixture 1-0.

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Chancellor Warns Of 'More Tough Choices'

George Osborne has warned the country of "more tough choices" and says there are no "miracle cures" for the UK economy, as he prepares to deliver Wednesday's Budget.

The Chancellor is under mounting pressure to change course and kick start growth as the UK faces an increased risk of falling into a triple-dip recession.

An opinion poll suggests most voters - including more than a quarter of Conservative supporters - think his policies are failing.

But Mr Osborne dismissed calls for extra borrowing to cut taxes or finance a "spending spree" and insisted that abandoning his austerity programme would be a "disaster".

Writing in The Sun on Sunday, Mr Osborne hinted he would do more to help homebuyers, business start-ups, apprentices and people saving for retirement.

Helping create jobs would mean "cutting tax rates and red tape, backing scientific advance, building new roads and broadband" and making the UK an attractive investment option, he said.

However he warned of "more tough choices" to be made on further slashing public spending from 2015 - with the scale of the squeeze to be unveiled in his statement.

"It won't be easy," he warned, amid rows between ministers over where the axe should fall.

His comments came as a report revealed families have cut back on spending by more than £3,000 a year since the start of the credit crunch.

The Chancellor will deliver his Budget on Wednesday

Consumer watchdog Which? found the cut in discretionary spending's opening up a £136bn black hole in the economy over the last five years.

Hopes the economy could grow in this quarter and thus avoid returning to recession were dealt a blow this week by a 1.5% fall in manufacturing output in January.

Former cabinet minister Liam Fox is leading Tory calls for a change of course - suggesting Corporation Tax be reduced to zero and far bigger cuts to public spending, notably welfare.

Other prominent backbench demands include cancelling a fuel duty rise due in the autumn and scrapping the beer duty escalator that automatically ups the price of a pint.

Mr Osborne is tipped to announce extra investment in housebuilding and road projects - called for by leading business groups - and help for people to buy homes.

But he will not abandon "Plan A" by increasing borrowing to fund it - a move being mooted within the coalition by Liberal Democrat Business Secretary Vince Cable.

Shadow chancellor Ed Balls said he would welcome extra borrowing to fund a cut in the basic rate of income tax to put more money into people's pockets.

But Mr Osborne hit back: "I think the British people know there are no easy answers in today's world. They aren't fooled by the miracle cures peddled by the same snake oil politicians who got us into this mess.

"Labour's answer to Britain's borrowing problems is to borrow even more - that simply doesn't make sense. If there were easy options and miracle cures then of course I would take them, but sadly there aren't."

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Cyprus Postpones Vote On Savings Raid Bailout

Cyprus's parliament has postponed its decision on whether savers must pay a levy on bank deposits under terms for an international bailout to avert bankruptcy.

The vote which was due to take place later this afternoon has been pushed back to Monday.

The eurozone demand that savers pay up to 10% of deposits as a condition for the 10bn euro (£8.6bn) bailout has drawn criticism and anger in the eastern Mediterranean island.

Queues of people gathered at its cash machines on Saturday as they tried to withdraw their money ahead of the move.

And the country's cooperative banks had to shut their doors after seeing a rush of savers keen to protect their money.

Savers could apparently withdraw money but were not able to carry out electronic transfers.

Newly-elected Cypriot President Nicos Anastasiades said refusing the bailout would have led to the collapse of the island's two largest banks, badly burnt by their exposure to bailed out neighbour Greece.

The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn) as a condition for the bailout, mainly needed to recapitalise banks.

Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island as well as Cypriots themselves.

Nicos Anastasiades with Angela Merkel in Brussels

The size of foreign deposits in Cyprus - estimated at 37% of the total - was one reason the eurozone agreed to the tax on savings, to take effect when banks reopen on Tuesday.

The tax will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the European Central Bank.

However, it will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.

The country has a large British expatriot community, among them David Symonds who lives in Limassol.

He told Sky News: "Everybody was surprised. We were assured only a few days ago that the haircut on the deposits was a red line for the government.

"When we learned that it might become a possibility we were told it would only be on deposits above 100,000 euros. Now of course we know it affects everybody."

Cyprus was badly hit by the Greek financial crisis because of its close links to the country.

Its two largest banks saw combined losses of 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product.

The rescue package was agreed after 10 hours of talks in Brussels and was significantly less than the 17bn euros (£14.7bn) asked for.

As part of the deal, the government will also have to hike corporate tax to 12.5% from 10% and sell off state assets to help balance the public finances.

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