The European Central Bank announced that it will stop emergency funding to Cypriot banks on Monday, if the troubled country fails to agree on a bailout program with its European partners by then.

In a statement released on Thursday, the Frankfurt-based central bank said, "the Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance (ELA) until Monday, 25 March 2013."

However, the bank said for it to continue emergency lending thereafter, Nicosia should adhere to the bailout conditions set by the EU and the International Monetary Fund.

"The ELA "could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks," the ECB said in the statement.

The decision comes after Cypriot lawmakers this week overwhelmingly rejected a bank deposit tax proposed by EU in return for a EUR 10 billion bailout. Tuesday's move by the Parliament threw the entire rescue deal into disarray, raising the possibility of a collapse of the country's banking sector.

Meanwhile, Cypriot authorities said on Wednesday that the banks will remain shut on Thursday and Friday and will likely reopen on Tuesday after a public holiday on Monday.

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, that is estimated to raise EUR 5.8 billion, sparked widespread anger among Cypriots.

Finance Minister Michael Sarris flew to Moscow immediately after the vote, hoping some kind of assistance from there given the high level of Russian deposits in Cypriot banks. The talks with Russian authorities are still on.

Meanwhile, the Cypriot government is reportedly preparing a 'plan B' to find enough support in the Parliament for the EU/IMF rescue package.

RTTNews