Cyprus faced fresh uncertainty on Friday over the future of its bailout programme after lawmakers rejected privatization plans, casting doubt on a new tranche of financial aid due in March.
Parliament voted down a roadmap for privatizations - a condition of the country's international bailout - in a cliffhanger vote late on Thursday.
The 'No' vote raises the risk the island will be plunged back into fiscal turmoil just a year after the 10 billion euro lifeline from the European Union and IMF pulled it back from the brink of default.
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The government called an emergency cabinet meeting for Friday morning.
"Above all we want to avert any adverse developments and maintain economic recovery," said Christos Stylianides, the government spokesman.
Authorities were likely to call a new session of parliament and present modified privatization proposals. The Cypriot finance minister has previously warned that the roadmap must be approved by March 5 for Cyprus to receive new aid worth 236 million euros.
Plans to establish a framework for the sale of ports, telecoms and electricity utilities have met stiff opposition from labor unions, with hundreds protesting outside parliament on Thursday evening.
The 56-member chamber's rejection of the plan hinged on the ruling right-wing party's refusal to endorse proposed modifications related to workers' legacy rights, claiming lenders would not accept it.
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The centrist Democratic Party - which until Thursday was part of the government - said its support was conditional on proposals made by the party being adopted.
"I hope more mature thoughts prevail," said Nicolas Papadopoulos, the Democratic Party chairman. "A precondition for us to move forward is that our amendments are accepted."