Cyprus has dropped a controversial levy on bank savings below €20,000. This has sparked a warning by the Central Bank governor that the crucial Eurozone bailout deal was now in danger of collapse.

The warning comes as International Monetary Fund (IMF) chief Christine Lagarde urged Cyprus to meet its commitments under the €10 billion deal sealed with Eurozone partners at the weekend.

The revised plan sees a one-time levy being dropped on bank savings below €20,000 but kept at 6.75% on deposits of €20,000 to €100,000. A levy of 9.9% would apply for amounts over €100,000.

The tax was originally to have applied to all bank deposits. But the Cypriot Central Bank says it "will not yield the estimated €5.8 billion agreed by the Eurogroup".