"I expect the aid programme for Cyprus will be in place by the end of March," he said, adding that politicians in his native Germany should not try to delay a controversial decision on Cyprus until after a German federal election in September.

"There must be no doubt about this: if Cyprus gets no external help, it will slide into default," said Asmussen.

He also warned that failing to help a systemically relevant euro zone country would "put at risk progress made last year on the euro crisis - and that would have high financial and political costs".

Politicians in Germany's governing alliance and the opposition are hesitant about granting Cyprus a 17.5 billion ($24 billion) bailout because of its status as a tax haven for rich Russians, many of whom use it for money-laundering.

Asmussen said an aid package for Cyrpus would be "no one-way street" and the government in Nicosia would have to fulfil "tough conditions" including scaling down its financial sector and introducing more banking transparency.

Cyprus will be high on the agenda of a meeting of euro zone finance ministers in Brussels on Monday.

Copyright Reuters, 2013