Cyprus pleaded for a new loan from Russia yesterday to avert a financial meltdown, after the island’s Parliament rejected the terms of a bailout from the EU, raising the risk of default and a bank crash.

Cypriot Finance Minister Michael Sarris said he had not reached a deal at a first meeting with his Russian counterpart Anton Siluanov in Moscow, but talks there would continue.

Russia’s finance ministry said Nicosia had sought a further €5 billion, on top of a five-year extension and lower interest on an existing €2.5 billion loan.

Cyprus is seeking Moscow’s help after Parliament voted down the eurozone’s plan for a €10 billion bailout on Tuesday.

Cypriots balked at EU demands for a levy on bank deposits to raise €5.8 billion, an unprecedented measure that opponents said would have violated the principle behind an EU-wide guarantee on deposits of up to €100,000.

Moscow has its own interests in ensuring the survival of banks in Cyprus, a haven for billions of euros squirrelled abroad by Russian businesses and individuals.

The European Central Bank’s chief negotiator on Cyprus, Joerg Asmussen, said the ECB would have to pull the plug on Cypriot banks unless the country took a bailout quickly.

“We can provide emergency liquidity only to solvent banks and... the solvency of Cypriot banks cannot be assumed if an aid programme is not agreed on soon, which would allow for a quick recapitalisation of the banking sector,” Asmussen told German weekly Die Zeit in an interview conducted on Tuesday evening.

Austrian Chancellor Werner Faymann said he could not rule out Cyprus leaving the euro zone, although he hoped its leaders would find a solution for it to stay.

Cyprus Energy Minister George Lakkotrypis was also in Moscow, officially for a tourism exhibition, but fuelling talk that access to untapped offshore gas reserves could be on the table as part of a deal for Russian aid. Cyprus has found big gas fields in its waters adjoining Israel.

“We had a very honest discussion, we’ve underscored how difficult the situation is,” Sarris told reporters after talks with Siluanov. “We’ll now continue our discussion to find the solution by which we hope we will be getting some support.

“There were no offers, nothing concrete,” he said.

Speculation was rife over the shape that Russian help might take. Government spokesman Christos Stylianides denied a Greek media report that Cyprus had reached a deal for Russian investors to buy Cyprus’s second largest bank, Cyprus Popular, which was taken over by the state last year.

Not a single Cypriot lawmaker voted for the EU bailout, which included a proposed levy that would have taken nearly 10 per cent from accounts over €100,000. Smaller accounts would also have been hit, although the Government proposed softening the blow to spare savers with less than €20,000.

It was the first time a national legislature had rejected the conditions for EU assistance, after three years in which lawmakers in Greece, Ireland, Portugal, Spain and Italy all accepted biting austerity measures to secure aid.

German Chancellor Angela Merkel, whose country is Europe’s main paymaster, said it was up to the Cypriot Government to come up with an alternative proposal but it was fair to expect savers with deposits over €100,000 to contribute to the bailout.

The EU has a track record of pressing smaller countries to vote again until they achieve the desired outcome.

Nicosia was eerily quiet yesterday, the morning after demonstrators cheered parliament’s rejection of what was seen as an unfair EU diktat.

The Government has not allowed banks to reopen this week to prevent a run, but cash machines which were emptied over the weekend have been replenished, giving people access to limited amounts of cash.

Among the most urgent decisions awaited was whether the Government will allow banks to reopen as planned today, or keep them closed until next week. Deputy Central Bank governor Spyros Stavrinakis said no decision had been taken yet.

The Cypriot Government denied yesterday that it had struck a deal to sell Cyprus Popular Bank to Russian investors as it tries to shore up its crippled banking sector. Cyprus Popular Bank holds a 48.9 per cent shareholding in Lombard Bank. The reports of the deal surfaced in Greek media.

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