Cyprus expected to detail heavy losses for major bank customers
* Terms tough on big depositors at largest bank
* Cypriot leader says risk of bankruptcy contained
* Germany says euro zone deposits are safe
By Karolina Tagaris
NICOSIA, March 30 (Reuters) - Cyprus was expected to confirm on Saturday that major depositors in its biggest bank will lose around 60 percent of their savings over 100,000 euros, under a bailout that has shaken European banks but saved the island from bankruptcy for now.
German Finance Minister Wolfgang Schaeuble sought to reassure bank customers elsewhere in Europe, saying in an interview in Germany's Bild tabloid on Saturday that their savings were safe after the Cyprus deal.
European officials have sought to stress that the island's bailout terms were a one off - after a suggestion by Eurogroup chairman Jeroen Dijsselbloem that the rescue would serve as a model for future crises rattled European financial markets.
Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the euro zone has made bank customers contribute to a bailout - were already enough to unnerve investors in European banks this week.
But a source with direct knowledge of the terms told Reuters on Friday that the conditions announced on Saturday would give depositors shares in the bank worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back.
The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.
There is no sign for now, however, that ordinary customers in other struggling euro zone countries like Greece, Italy or Spain are taking fright.
"Cyprus is and will remain a special one-off case," said Schaeuble, one of the main architects of the euro zone's response to a debt crisis now in its fourth year. "The savings accounts in Europe are safe."
"Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis.
"Cyprus's economy will now go through a long and painful period of adjustment. But then it will pay back the loan when it is on a solid economic foundation."
Cypriot President Nicos Anastasiades said on Friday that the 10-billion euro ($13 billion) bailout had contained the risk of national bankruptcy and would prevent it from leaving the euro.
Cypriots, however, are angry at the price attached to the rescue - the winding down of the island's second-largest bank, Cyprus Popular Bank, also known as Laiki, and an unprecedented raid on deposits over 100,000 euros.
Under the terms of the deal, the assets of Laiki bank will be transferred to Bank of Cyprus.
At Bank of Cyprus, about 22.5 percent of deposits over 100,000 euros will attract no interest, the source said. The remaining 40 percent will continue to attract interest, but will not be repaid unless the bank does well.
Those with deposits under 100,000 euros will continue to be protected under the state's deposit guarantee.
Banks on the island reopened to relative calm on Thursday after an almost two-week shutdown and the imposition of capital controls to prevent a run on banks by worried Cypriots and wealthy foreign depositors.
The imposition of the controls has led economists to warn that a second-class "Cyprus euro" could emerge, with funds trapped on the island less valuable than euros that can be freely spent abroad.
Under the terms of the capital controls, among other things Cypriots and foreigners are allowed to take only up to 1,000 euros in cash when they leave the island.
Anastasiades said the restrictions - unprecedented in the currency bloc since euro coins and banknotes entered circulation in 2002 - would be gradually lifted. He gave no time frame but the central bank said the measures would be reviewed daily.