Cyprus' Parliament on Tuesday rejected a proposed levy on bank deposits in return for a EUR 10 billion European bailout, putting the rescue deal in shambles. Lawmakers voted 36-0 to reject the bill, while the ruling party abstained.

Eurogroup Chairman Jeroen Dijsselbloem, who is also the Dutch Finance Minister, said the EU stands ready to help Cyprus, provided it adhere to the bailout conditions. "I take note of the decision of the Cypriot parliament on the government's proposal for a oneoff stability levy," Dijsselbloem said in a statement.

"I confirm that the Eurogroup stands ready to assist Cyprus in its reform efforts and reiterate the position of the Eurogroup as I stated yesterday," he added.

However, the European Central Bank, in a brief statement on Tuesday, said that it will provide liquidity for Cypriot banks, "as needed within the existing rules."

Under the bailout deal agreed on March 16, the Eurogroup wanted Cyprus government to impose a 9.9 percent tax on bank deposits above EUR 100,000 and a tax of 6.75 percent on deposits below that amount. The plan sparked widespread anger among Cypriots.

On Monday, however, Eurozone finance ministers signaled some flexibility as they urged Cypriot government to treat small depositors differently from large depositors. Nonetheless, it stuck to the condition that Cyprus should raise EUR 5.8 billion from the levy.

The government declared a temporary bank holiday in Cyprus on March 19 and 20 to prevent massive withdrawal of funds. Finance Minister Michael Sarris flew to Moscow after the vote, hoping some kind of assistance from there given the high level of Russian deposits in Cypriot banks.

German Finance Minister Wolfgang Schaeuble said that he "regret" Cyprus' decision to reject the bank levy.

RTTNews