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Cyprus officials said a bailout deal sealed Monday had stopped a "disorderly" default and exit from the euro, although the foreign minister expressed disappointment over the behaviour of his EU partners.
The Cypriot government spokesman defended the agreement sealed in the early hours in Brussels, despite the fact that it involves a radical downsizing of the Mediterranean island's financial sector.
"Finally, Cyprus has ended a period of uncertainty and insecurity for the economy. A disorderly default was avoided, which would have meant leaving the eurozone, with devastating consequences," spokesman Christos Stylianides said in a statement.
Under the terms of the agreement the island's second largest lender Laiki (Popular Bank) will be wound up while the Bank of Cyprus, the island's No.1 lender, will have to endure a major "haircut" on all deposits of more than 100,000 euros.
Stylianides said the levy on Bank of Cyprus deposits would be "around 30 percent".
"The important thing is that we have reached an agreement that allows us to kick-start the economy and lay the groundwork for a new beginning," Stylianides said.
"Without doubt that there are painful aspects that will place a burden on all of us."
The Cyprus central bank also said the deal had stopped a default.
"Today's agreement at the Eurogroup meeting ensures that Cyprus has avoided default and the associated consequences this would have had for the country," it said.
The Bank of Cyprus would be "restructured and fully capitalised" and would "acquire performing loans, other assets and the insured deposits of Laiki Bank."
"This will create a healthy and resilient bank able to serve the needs of its customers and, more broadly, support the Cyprus economy," it said.
Cyprus President Nicos Anastasiades, meanwhile, sent a tweet in which he expressed gratitude to Cypriots.
"Thank you for your messages of support. They gave me strength during last night’s struggle to secure the best possible outcome for #Cyprus," said the tweet.
He was due to arrive back in Cyprus at 5:30 pm (1530 GMT) and would make a live televised statement at 7:00 pm.
Foreign Minister Ioannis Kasoulides said Cypriots were right to be disappointed with the way that other European Union nations had behaved, adding that there was "no place for pressure, threats and blackmail."
"We belong to this Union as a full member. And we believe in this Union as a family of friendship, solidarity, mutual respect and understanding," he said in a speech during a national holiday parade in Nicosia.
"In this family there is no place for pressure, threats and blackmail.
"The dignity of each member of the European family is not measured and is not dependent on its size. There is no first class or second class member state, neither are there reputable and discredited ones or underprivileged and disadvantaged."
Nicolas Papadopoulos, chair of the parliamentary finance committee and an MP for the centrist Diko party, also spoke of the pain the deal will deliver to Cypriots.
"Without a shadow of a doubt the eurogroup deal and bailout agreement with the troika is a very painful one," he said.
In other reaction, Green party MP George Perdikes told state television, "Once the pressure has lifted we should seriously look at whether staying in the euro is in our interest or whether it is worth changing our currency."
Former Cyprus central bank governor Afxentis Afxentiou told state radio: "Cyprus has suffered a big hit and our standard of living will spiral downward, although the economy maybe able to recover in 2-3 years our standard of living will take at least 10 years to return."