THE finance minister of cash-strapped Cyprus says a haircut on deposits in local banks will be catastrophic, not only for Cyprus but the entire eurozone.
Such a possibility has been raised and, on Monday, Eurogroup finance ministers failed to rule it out if Nicosia is to clinch a bailout deal.
"We have repeated in the strongest terms that this is not an issue that is on the table," Finance Minister Michalis Sarris told reporters in Nicosia on Wednesday.
"It would be disastrous for Cyprus and the euro zone, and I think this message is gradually getting through to those who may have imagined that it is a possibility."
He said the issue "is not on the table for negotiation" with the so-called troika of international lenders - the European Commission, European Central Bank and International Monetary Fund - currently on the island.
A senior troika negotiating team began contacts with the authorities on Wednesday over what steps need to be taken to secure a bailout agreement earmarked for the end of March.
Prior to their arrival, a team of technocrats was on the island collecting information on semi-governmental organisations as part of a deal to finalise financial aid.
They are checking the assets, projects and accounts of state-run enterprises such as the electricity and telecoms authority.
In order to seal a bailout agreement it could need to sell off state assets, agree a sum on bank recapitalisation and refute dirty money claims.
The anticipated 17 billion euros ($A21.80 billion) figure is roughly the same as the island's GDP, and would increase debt to more than 140 per cent of GDP, a level considered unmanageable.
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