Cyprus’ President Nicos Anastasiades arrived in Brussels on Sunday afternoon for emergency talks with the island's international creditors.
They include the head of the European Central Bank, Mario Draghi; International Monetary Fund chief Christine Lagarde; EU president Herman Van Rompuy, European Commission head Jose Manuel Barroso, Eurogroup chair Jeroen Dijsselbloem, and Olli Rehn, the EU’s economics chief.
The European Central Bank threatened to halt life-support funding if there was no
deal by Monday.
The Troika – the International Monetary Fund, the European Commission and the European Central Bank – is pressuring Cyprus to raise 5.8 billion euros in order to receive a 10 billion euro bailout.
However, differences remain about how to raise that money. Cypriot parliamentarians overwhelmingly rejected a proposal to tax small and medium bank deposits, however a levy on deposits of more than 100,000 euros is said to be back on the cards following pressure from Germany and the EU.
"I'm expecting a long night. I think a deal will be done tonight, but it will be late," Irish Finance Minister Michael Noonan told reporters as he arrived for the Eurogroup talks.
Pierre Moscovici said on television before leaving Paris that it was time to put an end to "casino economy" practices on Cyprus.
"If we don't, it's you, it's me, it's all of us who will be left picking up the tab," Moscovici said.
The EU’s economics head, Olli Rehn, admitted on Saturday that Cyprus only had “hard choices left”, and urged for a deal by Sunday night.
Cypriot reports suggested officials had made progress with EU and IMF representatives, having agreed a 20 percent haircut on Bank of Cyprus and a 4.0 percent levy on other banks.
A radical restructuring of the island's second largest lender Laiki (Popular Bank) will already see all deposits over 100,000 euros put into a "bad bank" where they will be tied up for years and may never be fully recovered.
But negotiations stumbled on EU-IMF demands for a substantial levy on deposits above the same threshold in the Bank of Cyprus to avoid it facing similar restructuring. It holds more than a third of all deposits.
The haircut would take the form of a bond or share swap in a bid to get the measure through parliament.