Eurozone finance ministers have agreed a 10 billion euros ($NZ15.8 billion) bailout package for Cyprus to save the country from bankruptcy.
The deal was reached after talks in Brussels between the ministers and the International Monetary Fund.
In return, Cyprus is being asked to trim its deficit, shrink its banking sector and increase taxes.
Cyprus' banks were badly exposed to Greece, which has itself been the recipient of two huge bailouts.
"The eurogroup was able to reach a political agreement with the Cypriot authorities on the cornerstones of this agreement," says Eurogroup head Jeroen Dijsselbloem, after almost 10 hours of the negotiations.
The deal involves a levy on bank deposits intended to ensure those investors contribute to the bailout. But it will apply to all deposits - at a higher rate on amounts above 100,000 euros.
A European Central Bank official says he anticipates the levy could be imposed before the banks open on Tuesday - Monday is a bank holiday in Cyprus. There would otherwise be a likelihood of massive withdrawals to avoid it.
The Eurozone financial authorities have been keen until now to preserve bank deposits. The big question is whether this new precedent might unnerve bank customers in other countries in difficulty.
The danger if that were to happen is that some might want to pull their money out which could undermine the banks further.
Russians benefit
It has been a long and difficult negotiation, partly because of the reluctance of other Eurozone countries to use taxpayers' money to help foreign customers of Cypriot banks. Many of them are wealthy Russians.
There are concerns around Europe about whether all that money was legitimately acquired and also about how effective Cyprus is in dealing with money laundering.
Jacob Funk Kirkegaard, of the US-based Peterson Institute for International Economics, said that was a potential problem for any bailout negotiations.
"There is a general political sentiment that it is not acceptable to be bailing out a country, and thereby putting European taxpayers' money at risk, to basically protect Russian depositors in Cypriot banks," he said.
The Cypriot economy accounts for barely 0.2% of the eurozone area's overall output. But there is concern within the euro bloc that a default by Cyprus risks undermining the progress being made in Greece.
Cyprus is the fifth country to receive eurozone assistance since the bloc's financial crisis began to unfold in earnest nearly three years ago.
