The Cypriot parliament Tuesday rejected a proposed levy on bank savings as a condition for an EU-IMF bailout, leaving an uncertain outlook for the country's economy.

The 56-member-chamber threw out the levy legislation, with 36 votes against, 19 abstentions and none in favour.

The levy was decided at the end of last week at a Eurogroup finance ministers meeting in Brussels, Belgium after Cyprus President Nicos Anastasiades was warned that emergency liquidity assistance to the Cypriot hard-pressed banks would immediately be discontinued.

In a vain effort to build consensus, the government had revised the provisions of the original law so as to spare small savers with up to 20,000 euro deposits from a 6.75 percent-levy.

It suggested that deposits between 20,000 and 100,000 euros be taxed with 6.75 percent and deposits of over 100,000 euros be slashed by 9.9 percent.

However, the measure did not convince opposition parties and even the junior government coalition DIKO Party, which sided with the opposition in rejecting the bill.

The parliament's decision was greeted with cries of joy by hundreds of flag-waving demonstrators who had gathered in a nearby square, saying no to the deposits' levy and urging deputies to reject it.

A local resident also stressed that it was "correct" to object the plan, which could potentially "destroy" Cyprus.

Cypriot President Nicos Anastasiades will continue to discuss the issue with the parliament, hoping to reach a best-for-all solution.

At present, it is still unclear how the decision will affect the bailout deal.

Presented by Adam Justice