The European Central Bank set Cyprus a Monday deadline to agree a bailout plan, threatening to cut off funding to the islands' cash-strapped banks if a program is not agreed by then with the EU and the IMF.
The decision by the ECB's Governing Council, announced on Thursday, gives Cyprus a last chance to agree a bailout that bears the EU/IMF stamp, or else succumb to financial meltdown.
Cyprus has faced the prospect of bankruptcy since Tuesday when its tiny parliament voted unanimously against a levy on bank deposits to raise 5.8 billion euros ($7.51 billion)demanded by the EU under a 10 billion euro rescue.
The ECB's role is crucial because it controls the provision of central bank funds to Cypriot banks - lifeblood without which the island's bloated financial sector cannot function properly.
With Cyprus sovereign bonds ineligible for use as collateral for ECB refinancing operations due to their low credit ratings, the Cypriot central bank is providing banks with Emergency Liquidity Assistance (ELA).