Euro veteran Juncker says Cyprus bailout must be fixed now

(BRUSSELS) - Eurozone veteran Jean-Claude Juncker said Friday that Eurogroup finance ministers meeting later in the day must agree on a bailout for the near-bankrupt Cyprus government.

"The Cyprus question should not just be brought closer to a solution -- it should be solved," Luxembourg Prime Minister Juncker told reporters in the early hours at the close of a summit of eurozone leaders held in the middle of a two-day European Union summit.

Asked if he foresaw a deal being reached at the finance talks set for 1600 GMT, after the EU meeting ends, the recently-departed Eurogroup chairman said: "I can't imgaine that we would let the weekend pass without having solved the Cyprus problem."

Amid calls for Cypriot banks to write down some of their debt, similar to the way Greek banks accepted a massive haircut, Juncker maintained that Cyprus -- whose banks suffered through close links to the Greek financial system -- is a different case.

"We need to look for a solutiuon that is not a blunt haircut," Juncker said, although he added that the bailout when it is done must deliver "the same results."

A loan bailout initially mooted at 17 billion euros ($22.2 billion) -- roughly the same as the island's annual economic output -- has caused concerns within the International Monetary Fund, whose managing director Christine Lagarde will also attend the Friday night talks.

Fears are that this would increase the Cyprus government's debt to more than 140 percent of gross domestic product (GDP), a level considered unsustainable in the long run.

Debate has focused on a compulsory reduction, or haircut, on deposits in local banks to cut the overall cost of the rescue but Nicosia has said this would be catastrophic, not only for Cyprus but for the entire 17-state euro currency area.

Cyprus first requested financial aid in June last year.

"I do hope that by tomorrow we can negotiate and find a solution," new Cyprus President Nicos Anastasiades said on the sidelines of the EU summit, although he did not comment as he left the eurozone talks.