How controversial Cyprus bailout was agreed

It was before dawn on Saturday when the ultimatum came. Just hours earlier, heads of state from across the EU had wrapped up an uneventful summit and headed home.

But the sense of stability proved short-lived. By the time the sun rose in Brussels, a meeting of eurozone finance ministers, the International Monetary Fund (IMF) and the European Central Bank (ECB) had unleashed a whole new misery upon the residents of one struggling eurozone outpost.

Cyprus was about to go broke, and its new President, Nicos Anastasiades, and his finance minister, Michael Sarris, needed a bailout of as much as €17bn for their banks, which had been hit hard by the crisis in Greece. They had made clear that they did not want ordinary Cypriots to bear the brunt, but as a tough night of negotiations got under-way after the main summit, Mr Anastasiades relented and agreed to a small levy on deposits of under €100k.

For Germany and its allies, however, that did not go far enough, according to in-depths reports on the talks in the Financial Times and Wall Street Journal.

As the gruelling negotiations went into the small hours of Saturday, a stark choice emerged for the Cypriot delegation: agree a deal which included raising up to €7bn immediately from investors large and small, or the ECB would cut its support to one of Cyprus' troubled banks, saddling the government with unmanageable debts and bringing the whole financial system crashing down.

A shell-shocked Mr Anastasiades tried to walk out of the meeting, but soon realised that he did not have a choice. With the banks on the brink of collapse, the Mediterranean island had to tow line of the IMF, Germany, Finland and Slovakia.

A deflated President Anastasiades told the nation on Sunday: “The solution we concluded upon is not what we wanted, but is the least painful under the circumstances.”