Cyprus and EU in final-hour bailout talks

President Nicos Anastasiades is in Brussels hoping to save his indebted nation from bankruptcy. Source: AFP

THE Cyprus president has entered emergency talks with the island's international creditors in a last-ditch attempt to avert bankruptcy.

The clock is ticking for the tiny country after the European Central Bank threatened to halt life-support funding if there is no deal by Monday, a day before Cyprus's banks are due to reopen after a 10-day shutdown.

Cyprus and its creditors are trying to nail a deal that will restructure the island's banks and deliver up to six billion euros ($A7.5 billion) from large bank deposits in order to resurrect an agreement for a bailout worth up to 10 billion euros.

European Union economics head Olli Rehn acknowledged Cypriot leaders faced hard choices to try to limit the damage from the blow to its bloated banking sector, after a firestorm of protest over the EU plans to impose a special levy on bank customer deposits.

The cortege of Cypriot President Nicos Anastasiades entered EU headquarters in Brussels shortly after 2pm on Sunday (1am AEDT on Monday), an AFP correspondent said.

Anastasiades was to meet with ECB head Mario Draghi, IMF managing director Christine Lagarde, EU president Herman Van Rompuy, European Commission president Jose Manuel Barroso, Eurogroup chairman Jeroen Dijsselbloem and Rehn, sources told AFP.

Dijsselbloem will also bring in the finance ministers from all 17 currency partners on Sunday evening for what is likely to prove yet another sleepless night in snow-covered Brussels.

Cypriot reports suggested officials had made progress with EU and IMF representatives, having agreed a 20 per cent haircut on Bank of Cyprus and a 4.0 per cent levy on other banks.

A radical restructuring of the island's second largest lender Laiki (Popular Bank) will see all deposits over 100,000 euros put into a "bad bank" where they will be tied up for years and may never be fully recovered.

But negotiations stumbled on EU-IMF demands for a substantial levy on deposits above the same threshold in the Bank of Cyprus to avoid it facing similar restructuring. It holds more than a third of all deposits.

The haircut would take the form of a bond or share swap in a bid to get the measure through parliamen

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