ECB to continue financial support for Cypriot banks

The European Central Bank said Tuesday that it would continue to provide financial support for troubled Cypriot banks after the country's lawmakers rejected a bailout deal.

"The ECB reaffirms its commitment to provide liquidity as needed within the existing rules," the eurozone central bank said in a statement.

After Cypriot lawmakers overwhelmingly rejected a tax on bank deposits the government proposed to raise the funds needed to unlock a 10 billion euro ($13 billion) bailout package, the ECB said it was in contact with the EU and IMF, the other members of the so-called troika of international lenders.

Cypriot media reports said the government would now try to renegotiate the terms of the deal with the troika.

It would at the same time seek other ways of finding the 5.8 billion euros needed to unlock the bailout funds, with a bond issue, bank restructurings and trying to secure more Russian investments among the options.

European officials have strongly hinted in recent days that if Cyprus rejects the bailout conditions the ECB could pull its support for Cypriot banks, leading to a complete collapse of the country's financial system.

However, ECB officials have publicly vowed to protect the stability of the euro at all costs, and a collapse of the Cypriot financial system and likely bankruptcy of the state could spark contagion to other weak southern eurozone states such as Spain and Italy.