Cyprus lawmakers are preparing to vote on a new bailout on Friday as more pressure descends on them from the European Central Bank.
The government is urging parliament to approve a deal that would avert a bankruptcy that would almost certainly prompt Cyprus's exit from the euro zone.
"The next few hours will determine the future of the country," government spokesman Christos Stylianides said before the parliamentary debate. "We must all assume our share of the responsibility."
The ECB is pushing Cyprus to reach a deal quickly or risk Cypriot banks losing their financing. Without the government's approval for new measures, the country would lose the $13 billion bailout it previously requested and would risk a disorderly default.
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Several hundred protesters gathered outside the Parliament building on Friday morning, angrily demanding compensation for their losses at banks.
"Cypriot authorities have three things to do before Tuesday: Present a credible and viable plan B to replace the rescue rejected by parliament, install long-term controls on capital placed in the banks, and prepare to merge the two main banks in trouble," a senior European Union source told Agence France-Presse, adding that if those steps were not taken, a risk of Cyprus having to leave the euro zone would arise.
Finance ministers from the 17 countries in the euro zone are considering a plan that would close the two largest banks in Cyprus and freeze assets of uninsured depositors.
Cyprus Popular Bank (CPB) and the Bank of Cyprus would split and create a "bad bank," moving insured deposits to a "good bank" without sustaining any losses. Uninsured deposits would be placed in the bad bank and be frozen until assets were sold.
Russia turned down Cypriot requests for financial aid on Friday.