The Cypriot Parliament sent European Union (EU) and International Monetary Fund officials back to the drawing board on Tuesday by rejecting their controversial bailout package, reported The New York Times.
The plan, which was arranged over the weekend, would have taxed bank depositors as part of government efforts to qualify for an EU-IMF bailout seen as critical to the banking sector's very survival, according to NYT.
The proposed tax was reportedly a novel approach to austerity measures for the debt-strapped bloc. However, Moscow was quick to criticize the new idea, presumably because rich Russians often take recourse in Cyprus' loose tax laws and laxity on things like money-laundering, said NYT.
But The Washington Post said Cyprus President Nicos Anastasiades tried to limit legislative opposition by getting the so-called "troika" of EU negotiators to agree not tax the first €20,000 in deposits, even though this means the government's probably wouldn't have been able to scrape up the €5.8 billion needed for a bailout.
But his own party decided not to vote on the measure on Tuesday, reported NYT, saying their abstention "virtually assured" it wouldn't pass.
Banks in Cyprus have been closed for a national bank holiday since Monday, but reports say their doors could remain shut for several more days in order to stave off a potential bank run as concerns grow over the European Union's troubled economy.
Also Tuesday, Britain flew one million euros into Cyrpus to cover its military staff's needs in the event of a shortage, said BBC News -- evidence of mounting concern over the monetary situation there.
Analysts told NYT the European Central Bank may stop funding Cypriot banks if the EU measure failed.