EU approves Cyprus rescue deal

A preliminary agreement has been reached paving the way for Cyprus to receive a $A12.49b bailout. Source: AAP

A DEADLINE-DAY deal to resurrect a 10 billion euro ($A12.49 billion) bailout for Cyprus in exchange for a massive wipe-out across the island's two biggest banking chains won approval early on Monday from eurozone finance ministers, EU sources said.

Final backing was received at around 1200 AEDT, 12 hours into marathon talks for President Nicos Anastasiades with EU, ECB, IMF and eurozone leaders, with the Cypriot leader saying he was "content."

Earlier, Anastasiades had indicated a breakthrough after hours of gruelling talks on Sunday evening, as a deadline for the withdrawal of European Central Bank financing loomed.

"Efforts have culminated," he posted on Twitter.

Soon after, EU sources announced that eurozone finance ministers had given the deal their approval.

The agreement involves breaking up the island's second largest lender Laiki (Popular Bank).

And the Bank of Cyprus, the island's No.1, will take a major "haircut" - a forced wipeout of investment value, on all deposits of more than 100,000 euros ($A124,898).

The Bank of Cyprus, with one third of all holdings, survives, but at a massive price for investors - and the bank holds most of the island's offshore Russian deposits.

But the new agreement backs off from last week's collapsed deal to hit all savers in all banks on the island.

Smaller account-holders will be covered by the EU's deposit guarantee legislation, which runs to the 100,000-euro threshold: it is those above that level who face big losses overnight.

As the crisis unfolded last week, Russian leaders refused to cough up fresh aid or extend a 2014 repayment date on an existing 2.5 billion euros ($A3.12 billion) loan to Cyprus.

Both banks stayed closed and by the end of the week had cut cash machine withdrawal limits to as low as 100 euros ($A125) per day.

The negotiations were aimed at pulling together some seven billion euros, mainly from the Cypriot banking sector, to unlock a 10 billion-euro loans package first agreed nine days ago.

A major sticking-point throughout the talks was the ECB's demand for the Bank of Cyprus to pay a nine billion-euro Laiki bill due to Frankfurt, which appeared to have been accepted.

"We will do our utmost for Cyprus," the president had said via Twitter going into Sunday evening's talks.

Anastasiades met first with ECB head Mario Draghi, IMF managing director Christine Lagarde, EU president Herman Van Rompuy, European Commission head Jose Manuel Barroso, Euro group chair Jeroen Dijsselbloem and the economic affairs commissioner Olli Rehn.

Sources at the presidential palace in Nicosia told state media that at one point the Cypriot leader's frustration boiled over during the talks.

"Do you want to force me to resign?" the Cyprus News Agency quoted Anastasiades as telling the bailout bosses.

The crunch talks in the snow-covered Belgian capital were called after the ECB threatened to halt life support funding for Cyprus on Monday if there was no deal.

The banks in Cyprus are due to reopen on Tuesday after a 10-day shutdown.

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