The FTSEurofirst 300 Index finished slightly in the red after erasing its early gains.
Union Bancaire Privee fund manager Rupert Welchman felt the support of the European Central Bank (ECB) was sufficiently strong to prevent any major market hit from Cyprus, which rejected a proposed levy on bank deposits as a condition for a European bailout earlier this week.
"You've still got the ECB saying it will provide liquidity," said Welchman, whose portfolio is overweight on northern European financial stocks. "Cyprus will, of course, be a clear negative for European sentiment and it is a new and substantial negative, but the bigger picture is that Europe is trying to follow a roadmap to recovery and in this quest, Cyprus is a sideshow," he added.
Cyprus's parliament overwhelmingly rejected a tax on bank deposits on Tuesday, a key condition to receive a much-needed 10 billion euro ($13 billion) bailout from the so-called Troika. Thirty-six members of Cyprus's 56-seat parliament voted against the measure, while 19 abstained.
The finance minister of Cyprus, Michael Sarris, is visiting Moscow on Wednesday, increasing speculation that Cyprus could be looking to Russia for alternative financial assistance.
Earlier, Cyprus's finance minister, Michael Sarris, told CNBC that Russia has been very supportive about the terms of the 2.5 billion euro ($3.2 billion) loan that Cyprus has already received from Russia and that talks were now "looking beyond that."
Cypriot banks will remain closed on Wednesday.
(Read More: Euro Steady Near 4-Month Low on Jitters Over Cyprus)