Cypriot lawmakers have overwhelmingly rejected a deeply unpopular tax on bank deposits, throwing into doubt an international bailout for the troubled euro zone member needed to avert default and a banking collapse.

The 56-seat parliament voted by 36 votes against and 19 abstentions to bury the bill, a condition of a €10 billion European Union bailout for the Mediterranean island.

One deputy was absent.

Cyprus's government had earlier proposed to spare small savers from the levy following widespread condemnation.

EU countries had said they would withhold the bailout without the levy's approval, which would plunge one of the smallest European states closer to financial oblivion.

Earlier the country's President Nicos Anastasiades predicted the rejection of the bill.

"The feeling I'm having is that the house is going to reject the bill," he said.

Asked why, he added: "Because they feel and they think that it is unjust and it's against the interests of Cyprus at large."

The European Union and International Monetary Fund are demanding Cyprus raise €5.8 billion from depositors to secure its bailout, needed to rescue its financial sector.

However Europe's demand at the weekend that Cyprus impose a levy on bank accounts as part of that sparked outrage among Cypriots and unsettled financial markets.

Mr Anastasiades had refused to accept a levy of more than 10% on deposits above €100,000, which meant taxing smaller accounts too.

Stunned by the backlash and fearing rejection by Cypriot lawmakers, euro zone finance ministers urged Mr Nicosia to avoid hitting accounts below €100,000, and instead increase the levy on big accounts, which are unprotected by the state deposit guarantee.

French Finance Minister Pierre Moscovici said the euro zone could not lend Cyprus any more, since the country's debt would become unmanageable.

"Above €10 billion we are entering into a size of debt that is not sustainable," Mr Moscovici told reporters in Paris.

While Brussels had emphasised that the proposed measure was a one-off for a country that accounts for just 0.2% of European output, fears have grown that savers in other, larger European countries will take note and be spurred to withdraw funds.

Some Cypriots hope they could instead get aid from Russia, which has bailed out Cyprus in the past. Many Russians keep their money in Cyprus and operate businesses from there.

Government spokesman Christos Stylianides said Mr Anastasiades may also speak to President Vladimir Putin, who has described the deposit levy as "unfair, unprofessional and dangerous."

Russia's envoy to the EU likened the levy to a "forceful expropriation" that could wreck Cyprus's financial system.

"When the banks open, people will rush to withdraw their deposits - that's another threat - and then the whole banking system can collapse," said Vladimir Chizov.

Russian authorities have denied rumours that the Kremlin might offer more money, possibly in return for a future stake in Cyprus's large but as yet undeveloped offshore gas reserves, which have raised the island's strategic importance.

Stunned Cypriots emptied cash machines over the weekend and banks are to remain shut today and tomorrow to avoid a bank run. The island's stock exchange also suspended trading for another two days.