BERLIN, April 18 (Reuters) - Finance Minister Wolfgang Schaeuble urged German lawmakers on Thursday to approve a 10 billion euro bailout for Cyprus amid new uncertainty over whether the deal will get through the Mediterranean nation's own fractious parliament.
The Bundestag lower house is widely expected to back the rescue after Germany and its euro zone allies demanded that Cyprus impose major losses on depositors, shutter its second largest bank and raise the corporate tax rate in return for aid.
But surprise news on Wednesday that the Cypriot parliament is also likely to vote on the deal has raised fresh questions. Early signs are that nearly half the members of the 56-seat chamber may oppose it, a step that could plunge Cyprus into bankruptcy and force it out of the euro zone.
'Step by step we are winning back confidence. If you look at the markets, there is still nervousness and uncertainty. But it is considerably less that three years, two years or one year ago,' Schaeuble said in his speech.
'The aid for Cyprus secures the successes we've already achieved in the euro zone. We must prevent the problems in Cyprus from unleashing new problems in other euro zone countries.'
He added that if Cyprus were allowed to go bankrupt, there was a 'significant risk' of contagion to Greece and other vulnerable euro zone member states.
Responding to Schaeuble, the leader of the centre-left Social Democrats in parliament Frank-Walter Steinmeier said his party would support the bailout, but attacked the government for initially backing a plan to hit small savers in Cypriot banks.
That proposal was scrapped after a major backlash and the new bailout only hits people with deposits over 100,000 euros.
'Mr. Schaeuble, whether you asked for this or simply joined others in supporting it, it was a huge mistake. It stoked fear and insecurity in Europe,' said Steinmeier.
(Reporting by Noah Barkin and Madeline Chambers; Editing by Stephen Brown) Keywords: CYPRUS GERMANY/
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