Cyprus will ask Russia for a loan of between €3 billion and €5 billion before the weekend and then request aid from its euro zone partners for its ailing banks, an EU diplomat said.
The crisis-hit Mediterranean island will "first try to get a bilateral loan from Russia," said the diplomat, speaking on condition of anonymity.
Cyprus would then probably request euro zone aid for its banks next week along the lines of an offer made to Spain, he said.
The source had no figure for the banking needs, saying Nicosia must conduct a "clear analysis."
Cyprus, which is taking over the European Union's rotating presidency in July, has already secured a €2.5 billion low-interest loan from Russia to cover its refinancing needs for this year.
Estimates are that Cyprus needs around €4 billion to prop up its banks and help narrow the budget deficit, which widened last year to double the EU ceiling of three percent of gross domestic product (GDP).
The island's banks are heavily exposed to the troubled Greek economy. The government is already committed to underwriting a €1.8 billion capital issue for the island's worst exposed institution - Marfin Popular Bank - to recapitalise against the Greek debt crisis.
The Cypriot finance minister, Vasos Shiarly, said yesterday that help could come bilaterally or through the euro zone's rescue fund, the European Financial Stability Facility (EFSF).
"We are optimistic that we can secure funding needed to recapitalise the bank either through a bilateral agreement or from Europe via the EFSF," he said.
