Bloomberg News

Cyprus Picks Anastasiades as President to Fix Economy

February 24, 2013

Cyprus Presidential Candidate Nicos Anastasiades

Presidential candidate for the Democratic Rally of Cyprus (DISY) party, Nicos Anastasiades answers journalists' questions after voting for the first round of Cyprus' presidential election in Limassol. Photographer: Yiannis Kourtoglou/AFP via Getty Images

Nicos Anastasiades defeated opponent Stavros Malas to become Cyprus’s seventh president and begin the process of steering the country away from a financial collapse.

Anastasiades, 66, who leads Cyprus’s main opposition Democratic Rally party, or Disy, won 57.5 percent of the vote, compared with 42.5 percent for Malas, who was backed by the communist Akel party of outgoing president Demetris Christofias. The two faced off after a first-round vote on Feb. 17 failed to deliver an outright victory to Anastasiades.

“We will support him in actions and politics that we believe are followed for the good of the country,” Malas said as he conceded defeat, in comments televised live on state-run CYBC TV. “Right now the priority is the unity of the Cypriot people.” Anastasiades plans to make his first statements later tonight in Nicosia, the capital.

Cyprus’s new president, who was endorsed by German Chancellor Angela Merkel, will have to revive stalled talks with European partners on aid needed to save the island from a financial meltdown. Cyprus, a European Union member since 2004, has been negotiating for eight months with the European Commission, European Central Bank and International Monetary Fund over conditions for a rescue that could equal the size of its near 18 billion-euro ($24 billion) economy.

Shut Out

The country became the fifth euro-area member to request international aid in June. It has been shut out of debt markets for almost two years, with lenders including Bank of Cyprus Plc and Cyprus Popular Bank Plc losing 4.5 billion euros in last year’s restructuring of Greek sovereign debt. Cyprus needs the bailout to recapitalize its lenders as well as to finance the government over the next three years.

The country faces the payment of a 1.4 billion-euro bond on June 3. The risk of a Cypriot sovereign default is “material and rising,” Standard & Poor’s said on Feb. 20. There is “at least a one-in-three chance” that it will cut Cyprus’s CCC+ credit rating this year, S&P said.

After Greece, the Cypriot rescue is set to be the biggest in the 17-nation euro area as a proportion of gross domestic product. As much as 10 billion euros may be required to rescue the banks and 7.5 billion euros will be needed by the government, Finance Minister Vassos Shiarly said on Nov. 22.

Political Challenge

A change in government in Nicosia is unlikely to trigger immediate resolution of the problem as “the main political challenge to a deal lies elsewhere,” Alexander White, a European political analyst at JPMorgan Chase & Co. in London, said in a Feb. 19 note. “A deal in March or April is certainly possible, but given the complexity of the issue in Germany, and elsewhere, this may be optimistic.”

Merkel’s government insists that Russia contribute to any bailout, arguing that Russian money dominates the Cypriot banking system. Reaching agreement with Russia on contributing to a rescue will be an “immediate priority,” Anastasiades said Feb. 21 in answer to e-mailed questions.

Cyprus has been divided since 1974, when Turkey invaded the northern third of the island following a coup by supporters of the country’s union with Greece. This presidential election was the first since the invasion in which the economy was the main issue rather than reunification of the divided island.

To contact the reporter on this story: Georgios Georgiou in Athens at ggeorgiou5@bloomberg.net; Paul Tugwell in Athens at ptugwell1@bloomberg.net

To contact the editors responsible for this story: Maria Petrakis at mpetrakis@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net


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