European policy makers weighed how far to push Cyprus afterlawmakers in the Mediterranean nation rejected an unprecedentedlevy on bank deposits, throwing into limbo a rescue packagedesigned to keep it in the euro.

Stocks and the euro gained as investors speculated that theEuropean Central Bank, whose Governing Council meets today inFrankfurt, will continue to support the country's banks until nextweek. Chancellor Angela Merkel, saying she “regrets” the Cypriotparliament's decision, signaled a willingness to engage with Cyprusas long as its banks contribute to a bailout.

“It's important that Cyprus has a sustainable banking sector,”Merkel told reporters in Berlin. “Cyprus is our partner in the euroarea and therefore we are obliged to find a solution together.”