Cypriot President Nicos Anastasiades said on Saturday a levy on bank depositors was a painful decision he had to make in order to obtain financial aid, or else the island's economy would have gone bankrupt.
Anastasiades, elected three weeks ago with a pledge to negotiate a swift bailout, said refusal to agree to terms would have led to the collapse of the island's two largest banks.
The president said he would make a state address on Sunday, when the island's parliament was scheduled to meet in an emergency session to decide whether to approve the measure.
The eastern Mediterranean nation becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the euro zone for financial aid.
But in a radical departure from previous aid packages - and one which triggered fury across the island - euro zone finance ministers forced Cyprus's savers to forfeit up to 10 percent of their deposits to raise almost 6 billion euros.
"On Tuesday ... we would either chose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis," Anastasiades said in a written statement.
Had Cyprus chosen the "catastrophic scenario", he said, from Tuesday one of the two distressed banks would have ceased to operate since the European Central Bank had already decided to terminate provision of emergency liquidity assistance (ELA).
"The second bank would suspend its work, and neither could avoid collapse," he said.
Although he did not name the banks, he was referring to Cyprus Popular Bank, the recipient of the ELA facility for months, and Bank of Cyprus, the island's largest bank.
If the banks collapsed, he said, the state would be obliged to compensate depositors with a bill potentially reaching 30 billion euros, which the state would be unable to pay.
Thousands of Cypriots converged on automatic teller machines on Saturday to withdraw cash, leaving many inoperative by mid-afternoon. Co-operative credit societies, normally open for business on Saturdays, were forced to close to prevent a run on deposits.
(Reporting by Michele Kambas; Editing by Jason Webb)