Cyprus may need more than the 10 billion euros ($12.4 billion) staffers have estimated for a financial lifeline after bigger shortfalls than anticipated were found on the government’s balance sheet, according to the minutes of a meeting of international and Cypriot officials.

“Your public finances are in a worse shape than we expected,” Maarten Verwey, a troika official, said according to the minutes of the meeting obtained by Bloomberg News. “It is clear you have problems in your banking sector. It is not just the major banks in Cyprus, but the problems affect the entire banking sector.”

Euro-area finance ministers approved the bailout request from Cyprus on June 27. No amount was specified for the rescue, which will encompass the public sector as well as banks.

Cypriot banks lost more than 4 billion euros in Greece’s debt restructuring earlier this year.

The government had to rescue the island’s second-largest lender, Cyprus Popular Bank Pcl, in May by underwriting a 1.8-billion-euro capital increase.

Russian President Vladimir Putin and his Cypriot counterpart, Demetris Christofias, discussed “further economic cooperation” between the two countries during a phone conversation on Monday, the Cypriot government said in an e-mailed statement.

Cyprus could return to financial markets after it tackles its budget deficit and structural reforms, the troika said. The Cypriot government intends to narrow its budget deficit to as little as 2.5 percent of gross domestic product this year from 6.3 percent in 2011.

The Cypriot economy, which has contracted for three straight quarters, will see a “deep recession” continue into 2013, Verwey said. [Bloomberg]