Ordinary people's savings accounts have been raided to cover the costs of a Eurozone bailout for the first time.
The brutal £8.7 billion package to rescue the Cypriot economy includes a levy of up to 10 per cent on every saver - including Britons with accounts in the Mediterranean island and UK troops who are based there.
Queues formed at cash machines as people struggled to pull their money out after news broke of the unprecedented step.
But their efforts were in vain - because the levy had been automatically applied to people's accounts.
Liberal Democrat MEP Sharon Bowles, chair of the European Parliament's Economic and Monetary Affairs Committee, said she was appalled by the bailout.
"This grabbing of ordinary depositors' money is billed as a tax, so as to try and circumvent the EU's deposit guarantee laws. It robs smaller investors of the protection they were promised.
"If this were a bank, they would be in court for mis-selling," she said.
UKIP leader and South East MEP Nigel Farage said the levy was "theft, pure and simple".
Cypriot bank officials said depositors could access all their money except the amount set by the levy, and officials added that withdrawing funds on Saturday would not reduce anyone's levy.
European officials said people with less than £100,000 in their accounts will have to pay a one-time tax of 6.75%, those owning more money will lose 9.9%.
The levy is expected to raise £5.8 billion.
There are 59,000 British residents in Cyprus and 1.1 million Britons visit the island every year, the Foreign Office said.
A reported 3,500 British troops are based there.
Cyprus' Finance Minister Michalis Sarris defended the decision to accept the levy, saying it was either that or a complete economic meltdown.
"This was the least worst option," he told state broadcaster CyBC. "We battled to prevent the country from completely going bankrupt."
The country's co-operative banks also shut their doors after depositors gathered in hopes of protecting their savings.
Unlike commercial banks which remain closed on weekends, co-operative banks customarily open for business on Saturday.
"This is a specific agreement for Cyprus, with its complex situation and an oversized banking sector, which represents 80% of GDP, well above any other country in using the euro," a Finance Ministry statement said.
"Because of this, Cyprus' situation and this agreement are not transferable to any other country in the eurozone."
Cyprus has become the fourth euro area country to get a rescue package to save its banks that took
massive losses because of their exposure to toxic Greek debt.
The levy stirred up a political firestorm on the tiny island of a million people, with some politicians accusing the government of leading the country to "a tragic dead end".
Cyprian President Nicos Anastasiades, who defended the "painful" levy, will address the nation on Sunday amid increasing anger at the tactic.
It is aimed at wealthy foreign investors, with Russians reportedly having billions stashed away in Cypriot accounts.