The cash-strapped nation needs a 10 billion euro bailout to keep the government running. (Leonid Mamchenkov/Creative Commons)

The European Central Bank had threatened to cut emergency assistance to the Mediterranean island nation by Tuesday without an agreement. Cyprus needs a 10 billion euro ($13 billion) bailout to keep the government afloat.

More from the AP:

Under the plan, Cyprus' second-largest bank, Laiki, will be restructured and holders of bank deposits of more than 100,000 euros will have to take losses, the diplomats said. They spoke on condition of anonymity pending the official announcement. It was not immediately clear whether the holders of large deposits in the remaining Cypriot banks would equally be forced to take losses.

Cyprus could have been forced to abandon the euro currency had a deal not been reached by Monday. Nicosia has to raise 5.8 billion euros in order to qualify for the rescue loan package. 

SEE ALSO: Cyprus Economy Sparks Confict

From the New York Times:

As proposed, the deal would drastically reduce the size of Cyprus’s banking sector, which is eight times bigger than the island’s economic output. This breezy financial haven has fought bitterly to keep the banking sector intact as a way of sustaining its lifeblood and continuing to draw international investors, including wealthy Russians and thousands of businesses with hefty accounts here.

The deal still needs to be approved by 17 finance ministers from countries that use the euro, which could take another few weeks.

Read more Neon Tommy stories on Cyprus here.

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