“The issue is urgent. We know the recapitalisation of the banks must be completed by 30 June, and there are a few days left,” said finance minister Vassos Shiarly, who said the application may have to be made this month.
The government of the €18bn (£14.5bn) economy has been unable to borrow on financial markets for the past year, as private investors do not believe it can support its battered banks.
The Cypriot government would need the equivalent of 10 per cent of its GDP just to prop up Popular, its second largest bank, which needs an investor or the government to come to its aid with €1.8bn to enable it to meet its regulatory requirements.
Shiarly said any bailout would follow the Greek, Irish or Portuguese model of a comprehensive package, rather than the Spanish plan for a bank bailout alone.
Economists also fear that Italy could follow Spain and Cyprus in needing a bailout as its borrowing costs are steadily rising.