Cyprus has become the fifth eurozone country to seek financial assistance from the European Union's rescue funds.
The government announced it was applying for a bailout for its banking sector hit by exposure to the crisis in Greece.
Cyprus needs to raise at least €1.8bn, equivalent to about 10% of its domestic output, by 30 June to satisfy European regulators about the health of Cyprus Popular Bank, which saw its balance sheet hurt by bad Greek debt.
"The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spill over effects through its financial sector, due to its large exposure in the Greek economy," the government said.
The island suffered a further fiscal sovereign credit rating cut to non-investment, or junk, status by Fitch at BB+.
With a bailout widely viewed as all but inevitable, Cyprus has for weeks been trying to juggle its options between a bailout from Europe's rescue funds, the temporary EFSF and the permanent ESM, or a bilateral loan from either Russia or China.
Cypriot President Demetris Christofias will meet political leaders tomorrow afternoon, a statement from the presidency said.
If Cyprus signs up for the EU rescue programme it will join the ranks of Greece, Ireland, Portugal and Spain.
Mr Christofias, the EU's only Communist leader, has been reluctant to accept the fiscal and regulatory conditions that might be attached to a European rescue.
Weekend trips by government officials to China suggested Cyprus was still holding out hope for a bilateral loan from a third country.
Commerce, Industry and Tourism Minister Neoklis Sylikiotis confirmed discussions in China were focused on a loan or a Chinese investment in the troubled Cyprus Popular Bank.
"We have had some contacts ... We have requested an answer in coming days," Mr Sylikiotis said in comments to the state broadcaster.
Cyprus is fiercely protective of a corporate tax rate that is one of the lowest in the EU and eight months before a general election shows no appetite for the stringent spending cuts that any EU funding would tie it to.
"I think they want to avoid it (the EFSF) at least as the sole provider simply because they are afraid of the strings attached," said political analyst Hubert Faustman.
Officials say any aid via the EFSF would likely be restricted to the banking sector and not to broader budgetary requirements.
Cyprus, with just 1m people, has a disproportionately large off-shore financial sector that is heavily exposed to Greece, the larger neighbour with which it has close political links.
Cyprus Popular needs a capital infusion urgently to satisfy regulators after writing off the value of Greek government bonds in a sovereign debt swap earlier this year.
Russia already provided Cyprus with €2.5bn in a bilateral loan last year and has an interest in maintaining Cyprus as an offshore financial centre with low tax rates for Russian businessmen, who use it as a base to reinvest in Russia.
However, seeking such large sums from Russia or China is controversial in Cyprus, where EU membership is a matter of national pride.
It could be embarrassing for the EU as well, as Cyprus assumes the union's rotating presidency on 1 July.