President Nicos Anastasiades and his finance minister flew into Brussels today to try to find a solution to the crisis.
Underlining the gravity of Cyprus’ position, the EU’s economic affairs chief said there were now “only hard choices left” for the latest casualty of the euro zone crisis.
Facing a Monday deadline to avert a collapse of the Cypriot banking system, talks in Nicosia to seal a bailout from the EU and International Monetary Fund broke up late on Saturday without result.
“Negotiations are at a very delicate phase,” the Cypriot government said in a statement.
“The situation is very difficult and the deadlines are very tight,” it said.
The tone of the statement differed sharply from earlier expressions of cautious optimism during days of intense negotiations between Cypriot leaders and officials from the island’s “troika” of international lenders, the EU, IMF and European Central Bank.
Cyprus‘ overgrown banking sector has been crippled by exposure to crisis-hit Greece, and the EU says the east Mediterranean island must raise 5.8 billion euros on its own before it can receive a 10 billion euro bailout.
Without a deal on Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the euro zone.
Conservative leader Anastasiades, barely a month in the job and wrestling with Cyprus’ worst crisis since a 1974 invasion by Turkish forces split the island in two, is expected to meet heads of the EU, the European Central Bank and IMF.
Finance Ministers of the 17-nation euro zone are due to meet late on Sunday afternoon.
Scrambling to find the funds, officials said Cyprus had conceded to a one-time levy on bank deposits over 100,000 euros, a dramatic U-turn from five days ago when lawmakers angrily threw out a similar proposal as “bank robbery.”
A senior Cypriot official said Nicosia had agreed with its lenders on a 20 percent levy over and above 100,000 euros at the island’s largest lender, Bank of Cyprus, and four percent on deposits above the same level at other banks.