Conservative candidate takes power as Cyprus verges on bankruptcy

Mon, Feb 25, 2013, 00:00

Right-wing candidate Nikos Anastasaides won the Cypriot presidency by a landslide in yesterday’s run-off, defeating Communist AKEL party candidate Stavros Malas.

Mr Anastasiades (69) secured 57.5 per cent of the vote, the largest margin in 30 years.

As leader of the Democratic Rally, he received support from the centre-right European People’s Party during an extraordinary summit attended by Taoiseach Enda Kenny and German Chancellor Angela Merkel. Party president Wilfried Martens congratulated Mr Anastasiades.

Strict austerity

The election took place at a critical time for the cash-strapped island which faces economic meltdown if it does not receive a bailout in coming months.

Unwilling to carry out major civil service reforms or impose a strict austerity programme, outgoing president Demetris Christofias, of AKEL, has drawn out talks, leaving the hard decisions to his successor.

Cyprus’s economic crisis could spread to other euro zone states if not resolved soon, warned bailout fund chief Klaus Regling ahead of the vote that gave Mr Anastasiades the presidency.

Ratings agency Standard Poor’s said last week that the republic faces a “material and rising risk” of defaulting, particularly if financial aid up to €17.5 billion – the value of its domestic product – is not forthcoming.

Experts warn that such a loan will take the level of debt to an unsustainable 140 per cent of GDP.

Discussions between the new government and the EU-ECB-IMF troika are expected to formulate a deal by the end of March. Selling troubled Cypriot banks to Russia – which has loaned Cyprus €2.5 billion – is, however, unlikely.

Public sector salaries can be paid until April but a € 1.5 billion loan must be repaid by June. The main problem is that Cypriot banks are seven to eight times the size of the economy and the two main banks are heavily exposed to Greek debt. But Cyprus has vast offshore energy reserves which means that once the fields are developed it should be able to repay loans.