Several hundred protesters gathered outside the parliament building, with some chanting "thieves, thieves," and "people wake up, they're drinking your blood."
In order to get $13 billion in bailout loans from international creditors, Cyprus agreed to take a percentage of all deposits - including ordinary citizens' savings. The surprise deal stoked fears that deposits in other countries could be targeted.
Financial stocks fell sharply across Europe, as did the euro, even though the Cypriot economy accounts for only 0.2 percent of the combined output of the 17 European Union countries that use the currency.
"The damage is done," said Louise Cooper, who heads financial research firm CooperCity. "Europeans now know that their savings could be used to bail out banks."
The Cypriot government is now trying to modify the terms of the original plan and in particular to get a better deal for small savers with less than 100,000 euros. The weekend deal foresaw a one-off charge of 6.75 percent on those savings, rising to 9.9 percent for savings above the 100,000-euro mark.
While trying to make the package more appetizing for those with low savings, the government has to make sure that the total raised remains 5.8 billion euros.
The stakes are high for the country of a million people, because a rejection of the package could see the country go bankrupt and possibly out of the common euro currency. Officials also fear a run on Cypriot banks no matter which way the voting goes.
One of the reasons given for the raid on deposits is that Cyprus' troubled banks are eight times the size of the economy. The government would be unable to pay back the amount of loans it would need to rescue the banks. Another reason is that an estimated $26.17 billion of Russian money sits in Cypriot banks, part of it thought to be linked to money-laundering.