President Nicos Anastasiades of Cyprus is in Brussels today and will meet with EU finance ministers in a matter of hours to decide the fate of the tiny Island country.
"The events of recent days have led to a situation where there are no longer any optimal solutions available," Olli Rehn, the EU's top economic official, said Saturday. "There are only hard choices left."
A meeting of European Union finance minister has been set for Sunday, at 1 pm ET in Brussels.
The tiny island nation needs to find a way to raise nearly €6 billion to satisfy the conditions of a €10 billion EU rescue or face economic meltdown when banks reopen Tuesday after a 10-day hiatus.
Late Friday, after a long debate, the Cyprus parliament passed bills to create a sovereign wealth fund, nationalize pension assets and impose strict limits on the movement of capital.
Still unresolved is one of the most controversial parts of the bailout plan -- a tax on bank deposits.
The original EU bailout plan called for an unprecedented tax of on all bank deposits. Since then talks have focused on proposals that would protect deposits of less than €100,000 euros but impose a heavy tax -- perhaps 20% to 25% -- on larger accounts.
Officials have been scrambling to find ways to raise Cyprus' share of an EU bailout since parliament threw out the original terms last week.
Under the financial restructuring being considered, the country's second largest bank, Popular Bank of Cyprus, would be broken up and depositors under €100,000 protected.
The proposed tax on all accounts, including deposits covered by the national guarantee program, outraged Cypriots and prompted widespread condemnation for undermining the principle that ordinary savers should not pay for bank failures.
Without a rescue, the European Central Bank has said it will cut off the emergency funding that has been keeping the country's biggest banks afloat, potentially leading to Cyprus' exit from the eurozone.
Cypriots have been queuing at cash machines since the EU bailout proposal was first announced on March 16.
It may not be enough to get the 10 billion euro bank bailout. Germany is dead serious about the Cypriot people financing some of the bailout, and not reaching the target of 5.8 billion euros could result in the unthinkable; Cyprus banks unable to open Tuesday morning and the entire financial system grinding to a halt.
The rest of the EU seems relatively unconcerned about a Cypriot exit from the euro. The country has a very small economy and it is not likely that there would be contagion from the meltdown.
But a Cyprus exit from the euro would establish a precedent - as has the idea of a depositor haircut that has people in Spain and Italy nervous about what their own governments might do in similar circimstances.
The negotiations will go down to the wire with the outcome still in doubt.