BANK DEBT:Cyprus could agree a bailout deal with euro zone ministers by mid-December and get a first tranche of funds to shore up its banks by the end of January.

The island, whose banks are heavily exposed to debt-crippled Greece, has been discussing aid conditions with the IMF and EU institutions since June. It could need up to €17.5 billion, equal to its entire annual economic output.

Finance minister Vassos Shiarly told lawmakers on Thursday a preliminary agreement had been reached with international creditors. This needed to be supplemented with an assessment of the banks’ recapitalisation needs.

The four-year programme under negotiation with the “troika” envisages heavy spending cuts.

A finance ministry document submitted to parliament calls for a 6.5 per cent to 12.5 per cent cut in public sector salaries, a two-year increase in the retirement age for the public sector and an incremental reduction in the public sector workforce by at least 5,000 by 2016.