LOS ANGELES, CA (Catholic Online) - The Cyprus government issued a statement asking for assistance following "negative spillover effects through its financial sector, due to its large exposure in the Greek economy."

Government Spokesman Stefanos Stefanou declined to how much Cyprus would ask from the European bailout fund. The amount, he said would be subject to negotiations in the coming days.

The 27 leaders of the European Union are scheduled to meet in Brussels on Thursday.

Despite its demand for European aid, Stefanou says that the Cypriot government would continue negotiations for a possible loan from a country outside the EU. Cyprus has been living off a loan from Russian the majority of this year.

"One doesn't preclude the other," Stefanou told the Associated Press. "Our efforts to secure a bilateral loan will continue."

Cyprus is struggling to find about $2.26 billion in U.S. dollars, 10 percent of its gross domestic product by the end of this month to recapitalize its second largest lender, Cyprus Popular Bank.

It has become apparent over the past weeks that the bank would not find the money from the private sector and would need to get it from the government, which is in desperate need of cash and unable to raise money in bond markets, where its borrowing rates are too high.

Ratings agency Fitch became the third agency to downgrade Cyprus' credit rating to junk status. The agency estimates that the island will need another $5 billion to recapitalize its banking sector.

The Cypriot banks' exposure to Greek debt in addition to a rise in bad loans over the last year has caused the Cypriot economy to shrink. Unemployment has risen to record levels.

In a related development, credit rating agency Moody's hit 28 Spanish banks with new credit downgrades, as Madrid formally requested a rescue loan of up to $125 billion for the banking sector from its eurozone partners.

Moody's said the banks face rising losses from commercial real estate loans and that Madrid's own lowered credit grade also contributed to the rating cuts.

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