Cyprus's banking sector has taken a massive hit because of its exposure to Greece.

One senior EU official, reviewing Cyprus's economic situation, said this week that it had “heavily depleted access” to financial markets. Cypriot banks suffered “inordinately” when the private sector agreed to take haircuts as part of Greece's bail-out, with huge Greek debts written off.

It means that Cyprus might be obliged to become the fifth eurozone country to call upon the European Financial Stability Facility (EFSF), the currency bloc's rescue fund. However, it might yet go down a different route from Greece, Ireland, Portugal and Spain, and instead take a bilateral loan from a country outside the EU.

Cyprus faces a deadline of 30 June to recapitalise its second biggest bank, Cyprus Popular, to the tune of €1.8bn. But it has not yet submitted an application for a loan to the Eurogroup of eurozone finance ministers, an EU official said on Tuesday.

Cyprus last year avoided a eurozone bail-out by negotiating a loan of €2.5bn from Russia and may do so again.

“We are optimistic we will get the financing we need to recapitalise the banks, whether that will be through a bilateral agreement, or through the mechanism, the EFSF,” Vassos Shiarly, Cyprus's finance minister, said on Tuesday.

Corporation tax

Cyprus sees advantages in getting the money from outside the EU because it would not have to submit to the austerity and structural reform conditions that the eurozone places on bail-outs. Such conditions might well bring into the spotlight its corporation tax rate, which at 10% is the lowest in the EU.

Last year, Ireland was put under pressure by the leaders of some other EU states, most notably Nicolas Sarkozy, the then president of France, to raise its corporation tax rate, also one of the EU's lowest, when it requested a bail-out. Ireland succeeded in preventing any change, but the issue did not help in its negotiations to get a better deal, particularly in the interest rate it paid on the bail-out loans.

On the other hand, Cyprus's government will be wary of looking too deeply reliant on funding from Russia just as it takes over the presidency of the Council of Ministers.

Cyprus's influence in shaping the response to the eurozone's sovereign debt and banking crisis will be limited. Most policy is being shaped in national capitals, between the leaders of the eurozone's largest economies, France, Germany, Italy and Spain, and by the team working for Herman Van Rompuy, the president of the European Council.

However, as the first country to take over the presidency while itself experiencing the full force of the eurozone storm, it will add a unique perspective – as long as it can deal with problems in its own backyard first.