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Cyprus Locked in Tough Talks (Update1)

Updated from 6:42 p.m. EDT By Menelaos Hadjicostis, Associated Press

NICOSIA, Cyprus -- Cyprus officials and international representatives ended torturous negotiation in the early hours of Sunday with no agreement on a plan to raise money the island nation needs to qualify for a bailout package. Talks are set to resume later Sunday in Brussels, but time is running out: Failure would mean Cyprus could declare bankruptcy in just two days and possibly have to exit the eurozone.

Cyprus President Nicos Anastasiades and Finance Minister Michalis Sarris will travel to the Belgian capital early Sunday. A viable plan must be cemented before finance ministers from the 17 countries that use the euro currency meet in Brussels in the evening.

"Negotiations are at a very delicate phase," government spokesman Christos Stylianides said in a statement. "The situation is very difficult and the margins very limited."

Cyprus has been told it must raise 5.8 billion euros ($7.5 billion) in order to secure 10 billion euros in rescue loans from other European countries that use the single currency, as well as from the IMF.

The IMF, European Central Bank and European Commission -- known as the troika -- will determine whether the plan that the Cypriots devise will meet the requirements for any international bailout package. Then, the plan is to be presented to the eurozone finance ministers for final approval.

The European Central Bank has said it will stop providing emergency funding to Cyprus' banks after Monday if no new plan is in place. Without its support, the banks would collapse on Tuesday, pushing the country toward bankruptcy and a potential exit from the 17-nation bloc that uses the euro currency.

"We recognize the progress now being made by the Cypriot government toward a solution which can pave the way for an agreement on a financial assistance program for Cyprus," European monetary affairs commissioner Olli Rehn said in Brussels. "Intensive work and contacts will continue in the coming hours."

In Brussels, Anastasiades will meet with IMF chief Christine Lagarde and other European officials before the crucial Eurogroup meeting.

The country's lawmakers soundly rejected an unpopular initial plan that would have seized up to 10% of people's bank accounts, and Cyprus is now seeking another way to raise the desperately needed money. But the idea of some sort of deposit grab returned to the fore after Cyprus' attempt to gain Russian financial aid failed.

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