Banks in Cyprus will remain closed until Tuesday as the country tries to avert financial meltdown after rejecting the terms of a controversial bailout, turning instead to Russia for help.
An official said banks, which been shut for days amid fears of a run on savings, will stay closed on Thursday and Friday, CNBC and Reuters reported. Monday is a public holiday.
Earlier, Germany said the banks were effectively insolvent and might never open at all unless Cypriot political leaders accepted a bailout deal.
Thousands of Cypriots withdrew savings after the unexpected European Union announcement that it would provide $12.9 billion in exchange for up to 10 per cent of the value of all bank deposits – a move that would have thrown the Mediterranean island a lifeline but hundreds of thousands of citizens out of pocket.
Germany's finance minister, Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds,” according to a BBC report, meaning savers might lose all their money if no deal was reached.
Greek media reports suggested the Cyprus Popular Bank had been sold to Russian investors, but the Cypriot government denied such a deal, Reuters said.
German Chancellor Angela Merkel said the ball was now in Cyprus' court. "I regret the vote of the parliament yesterday," she told reporters. "But of course we respect it and will now look to see what proposals Cyprus makes.
"From a political point of view, I say that Cyprus needs a sustainable banking sector. Today's banking sector is not sustainable," she added.
Even before the deal was rejected, Cypriot Finance Minister Michalis Sarris was already in Moscow working on an alternative plan to extend loans by using the island’s natural resources as a guarantee, according to English-language Cyprus Mail newspaper.
The crisis leaves the 17-nation Euro currency zone in uncharted territory: Greece, Portugal, Ireland, Spain and Italy have all accepted austerity cuts in return for aid.
Cyprus’ parliament rejected the deal late Tuesday when 36 lawmakers voted unanimously against it and the ruling party abstained, Reuters reported. Outside the parliament, hundreds demonstrated, chanting: "They're drinking our blood."
"The voice of the people was heard," jubilant 65-year-old retiree Andreas Miltiadou told Reuters after the vote.
Ivan Tchakarov, chief economist at Renaissance Capital, told CNBC that Russia, which was enraged by the unexpected European deal, could step in to save Cyprus from total financial collapse.
"This situation presents a fantastic opportunity for Russia and even President Putin to take moral high ground and to extend another loan to Cyprus and to become a savior of Europe," he told CNBC in Moscow.
"At the end of the day we're only talking about an additional seven to eight billion dollars of additional money that is needed to have a complete package for Cyprus, this is small change for Russia.”
Russian citizens account for the majority of the billions of euros held in Cypriot banks by foreign depositors.
Russia wasn’t the only critic of the deal, which was greeted with widespread dismay among global money markets. In an editorial, Bloomberg said it was the “worst” decision of the entire regional financial crisis, while the Economist panned it as "unfair, short-sighted and self-defeating."
Reuters contributed to this report.