A Brussels-based task force will provide technical assistance to the Cypriot government and issue quarterly progress reports, according to European Commission president Jose Manuel Barroso.

Addressing journalists during the midday briefing in Brussels this afternoon, Mr Barroso said Cyprus had also accepted an independent evaluation of its anti-money laundering legislation, an issue of high importance for several member states.

With a financial sector much larger than its GDP, Cyprus has built a reputation of being a haven for Russian money launderers.

Mr Barroso said this model was “unsustainable” but refused to pass judgment on the issue of money laundering.

“Cyprus has a huge financial system compared to GDP and the way it was structured was not sustainable, especially after the Greek sovereign debt crisis. There has to be a severe process of deleveraging of the financial sector,” Mr Barroso said.

He added that EU solidarity with Cyprus in the form of a €10 billion bailout agreement had staved off “a disorderly default” as the island state faced bankruptcy “as of this week”.

Mr Barroso said he was optimistic about the deal but said the implementation depended on Cyprus. He insisted this was not just about financial stability and urged member states to show solidarity by investing in Cyprus to help kick-start the economy.

He did not give details about the obligations undertaken by the Cypriot government to wind down the second largest bank and rake in some €5.8 billion from depositors holding savings of €100,000 and more.