Cyprus's parliament overwhelmingly rejected a tax on bank deposits as a condition of an international bailout.
Thirty-six members of the 56-seat parliament voted against the measure, while 19 abstained. Parliament will resume their deliberations on Thursday.
Meanwhile a government source told CNBC that the country's finance minister Michael Sarris had tendered his resignation. The source said his resignation had not been accepted by Cyprus's president.
"At this point in time, we are saying [to international lenders] that if you think that by doing this you are fixing things, by actually destroying our economy and one of the biggest and strongest financial sectors we had on this island, then we have to say 'no'," Efi Xanthou, international relations secretary of the Cyprus Green Party told CNBC.
"We do not want to have this island in the throttle of these organizations for the next ten to fifteen years," Xanthou, who also sits on the parliamentary finance committee, said in the Cypriot capital of Nicosia on Tuesday.
According to Reuters, a revised draft of the deposit levy would exempt savings below 20,000 euros ($26,000) from the 6.75-percent tax, though the government hasn't explained how it will plug the funding gap as a result of the move.
Efi Xanthou said that whatever decision was made, as soon as the banks opened, there would be a "stampede" of investors rushing to withdraw their money. "No depositor, no matter how big or small their accounts, will feel safe," Xanthou added.
(Watch Now: What's Really Happening in Cyprus? )
Meanwhile, the Cyprus Stock Exchange suspended trading on Tuesday and Wednesday, while banks remain closed and Fitch Ratings put a number of Cyprus banks on negative ratings watch.
Athina Kyriakidou, a member of the parliament and a coalition partner to the ruling Democratic Rally party, told CNBC that she would be proposing an amendment to the levy in an effort to avert Europe's effort to "destroy Cyprus financially."
Breaking with previous practice that depositors' savings were inviolable, euro-zone finance ministers announced over the weekend a one-off tax on Cypriot bank accounts would be imposed as part of a 10 billion euro ($13 billion) bailout by the European Union.
The measure infuriated ordinary Cypriots, who staged noisy demonstrations in the capital, Nicosia.
Tuesday's vote, originally planned for Sunday, has been postponed twice already in an effort to build consensus in a fractious parliament.
The initial proposal led to a sell-off in the euro and global stock markets. Ordinary Cypriots say they are being forced to pay the price of the country's banking crisis.
European leaders have said they are open to reworking the deposit levy as long as Cyprus came up with the money.
"The rates could be different and could protect deposits under 100,000 euros, we are waiting for that and we are ready for that," French Finance Minister Pierre Moscovici told CNBC on Tuesday.
"There was a huge problem in Cyprus, nobody can deny that - with a banking sector which was absolutely enormous, with some advantages which were huge too and a lack of transparency- we had to address that, that's what we're doing,"
(Read More: Cyprus President Is a 'Fool': Gartman )
While Brussels has emphasized that the measure is a one-off for a country that accounts for just 0.2 percent of European output, fears have grown that savers in larger European countries become nervous and start withdrawing funds .
"If you're a small depositor in Cyprus you'll tell yourself that it would have been better to keep your money under the carpet than in a bank," said a French bank executive who declined to be named.
"And if you're a Greek, a Spaniard or an Italian, well, you'll tell yourself that you might be next."More From CNBC
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