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Europe Edging Closer to Cyprus Bailout

European leaders are edging closer to approving another government bailout -- this time for recession-plagued Cyprus.

European Union leaders are meeting later this week in Brussels to discuss the terms of a $22 billion rescue package for Cyprus that would roughly equal the size of the Mediterranean island nation's annual economic output.

Cyprus accounts for just a small fraction of the economic output of the 17-nation bloc that uses the euro. But the Cypriot economy has been faltering, contracting six straight quarters. The government faces bankruptcy without the bailout, which could imperil the overall economic stability of the currency union.

A Cyprus bailout would be the eurozone's fifth -- following two to Greece and one apiece to Ireland and Portugal. Much of the money would go to refinance Cypriot banks, which have lost billions of dollars in bad debts from nearby Greece.

Terms of the proposed bailout have not been disclosed. Cypriot officials are suggesting they may be willing to increase the island's low corporate tax as a way to help pay for the bailout. But the new Cypriot president, Nicos Anastasiades, says that imposing losses on bank depositors is "out of the question."

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