After days of speculation Cyprus has confirmed it has applied for an EU bailout.

The country has asked for 1.8 billion euros by Friday to recapitalise its leading bank, which has been affected by Greece's substantial debts.

Tiny Cyprus needs to raise the money - equivalent to about ten per cent of its domestic output - by June 30 to satisfy European regulators about the health of Cyprus Popular Bank.

"The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spill over effects through its financial sector, due to its large exposure in the Greek economy," a government announcement said.

Cyprus is the fifth euro zone country to seek financial assistance after Greece, Ireland, Portugal and Spain also asked for help from the EU's rescue funds.