Nicosia - Cyprus, the fifth eurozone country to seek emergency funding from Europe, may need a bailout of up to €10bn, over half the size of its economy, officials said on Tuesday.
The Mediterranean island, with a banking sector heavily exposed to debt-crippled Greece, said on Monday it was formally applying for help from the European Union's rescue funds.
Cyprus is the eurozone's third-smallest economy but it joins Greece, Ireland, Portugal and Spain in seeking EU rescue funds to try and stay afloat, and is the latest sign that policymakers have failed to stop the debt crisis spreading.
European leaders will meet at a summit on Thursday and Friday but they are not expected to come up with a lasting solution to the region's problems that have also sent Italy's borrowing costs soaring.
Two eurozone officials said that a package of up to €10bn was being considered for the €17.3bn Cyrpriot economy.
"The exact number has not been decided yet. It was to be €6bn for the state financing and €2bn for the banks but that is optimistic - it is more likely to be seven and three - up to €10bn in total," one eurozone official said.
A second official confirmed the amount was likely to be up to €10bn, a massive bill for Cyprus.
Cyprus needs to plug a €1.8bn regulatory capital shortfall in its second-largest lender by June 30. Potential aid could be more comprehensive to cover fiscal requirements, Finance Minister Vassos Shiarly told Reuters.
Cyprus is thought to have applied to the EU for aid after exhausting attempts to secure loans from either China or Russia. Those efforts, however, will be ongoing.
"We will continue efforts to secure a bilateral loan, which can be used accordingly," government spokesperson Stefanos Stefanou said.
Cyprus has been shut out of international capital markets for more than a year, with yields on its 10-year benchmark bond over 16% on Tuesday. Sidestepping EU aid earlier, it secured a €2.5bn loan from Russia in late 2011.
The loan amount is expected to cover needs in 2012, but not in 2013, when Cyprus has €2.25bn in refinancing, including a euro medium-term note (EMTN) redemption.
President Demetris Christofias, whose administration has been slammed by opposition for dragging its feet in both applying to the EU and taking measures earlier to shore up the island's flagging economy, was to brief politicians later on Tuesday.
Christofias has been accused by the opposition of being out of touch with reality and ignoring warning signs that the economy was in trouble, suggestions the government strongly denies.
The bailout request comes as Cyprus prepares to assume the rotating EU presidency on July 1.
"It is a tragic coincidence," Cyprus parliamentary speaker Yiannakis Omirou told state radio.