The paper said euro zone finance ministers want to wait to work with the successor of outgoing communist President Dimitris Christofias, who is not seeking re-election.

The incumbent Christofias categorically rejects the sale of state companies. Without privatisation revenues the country cannot be reformed," it quoted sources in Brussels as saying.

The head of euro zone finance ministers, Jean-Claude Juncker, said last month the ministers would discuss at their next meeting on January 21 a deal for Cyprus of up to 17.5 bln euros ($22.6 bln), equal to its entire GDP to recapitalise banks that are heavily exposed to Greece and to pay down a runaway public sector deficit.

Further complicating the outlook for the island, a senior member of Germany's main opposition Social Democrats (SPD) was quoted on Wednesday as saying his party would not support financial aid for Cyprus.

"As matters stand, I cannot imagine that German taxpayers save Cypriot banks whose business model is based on facilitating tax evasion," SPD chairman Sigmar Gabriel told the Sueddeutsche Zeitung daily.

German media has in the past criticised Cyprus's status as a popular tax haven for wealthy Russians and expressed unease about bailing out the country's banks.

The centre-left SPD, which hopes to oust conservative Chancellor Angela Merkel in German elections due in September, has taken a hard line against tax evasion, including by wealthy Germans who squirrel away cash in Swiss bank accounts.

Merkel would need SPD votes to secure German parliamentary backing for a Cypriot bailout.

"If Mrs Merkel wants SPD support for a Cyprus bailout package she will need good reasons. At present I do not see them," said Gabriel, whose party is lagging well behind Merkel's Christian Democrats in opinion polls.

Sueddeutsche Zeitung quoted German government sources as saying Merkel would only seek parliamentary backing for a Cypriot bailout if Nicosia embraces "radical reforms".

Merkel is due to take part in a gathering of the European Popular Party leaders in Cyprus on Friday.

Source: Financial Mirror