New conservative president and head of government promises to secure a bail-out swiftly.
Nicos Anastasiades, a
conservative, was yesterday (24 February) elected president of Cyprus, beating
his left-wing opponent by 15 percentage points and ending five years of
left-wing rule over the divided island's ethnic-Greek community.
Anastasiades, who has led the
Democratic Rally (DISY) party for the past 15 years, won 46% of the votes cast
in the first round on 17 February, and he boosted that figure to 57.5% yesterday
to beat off the challenge of Stavros Malas, an independent backed by the
Communist Party of outgoing president Demetris Christofias. Support for Malas rose
from 27% in the first round, suggesting
that he secured the backing of most of those who had voted in the first round
for George Lillikas, an independent candidate backed by a small left-wing party.
The new president, who will also
serve as the head of government, has said that
he will resume talks immediately with a troika of international creditors – the
International Monetary Fund, the European Commission and the European Central
Bank – on a €17 billion bail-out package.
On Friday (22 February), the European
Commission revised its economic forecasts for Cyprus downwards and believes a
prolonged recession is on the cards. It expects Cyprus's economy to contract by
3.5% this year, owing to the EU's economic problems and austerity measures
taken to secure a bail-out. It forecasts unemployment to be 13.7% at the end of
the year. Cyprus's problems stem from Cypriot banks' heavy exposure to Greece.
Cyprus has been talking with
the troika about a bail-out since June. In the meantime, it has received a €2.5 billion loan from Russia, with
which Cyprus has strong ties, and has taken loans from state-owned companies.
The troika believes that the
Cypriot economy is overly dependent on the financial sector and is demanding
that the banking sector be restructured. That could entail losses for customers
and could unsettle investors in other EU countries with financial difficulties.
The focus on the banking system has also raised the prominence of long-standing
claims that Cypriot banks are frequently used to launder money. The outgoing
Cypriot government has insisted that its record stands up well in international
Joseph Daul, the leader of
the conservative European People's Party in the European Parliament, highlighted
one of a number of advantages that Anastasiades is seen as having over his
predecessor: support from abroad. “I am convinced that Nicos Anastasiades
long-standing experience and strong international network, together with his
new coalition government, will succeed in implementing the necessary reforms
towards the reconstruction of a new European future for the island,” he said. Anastasiades
has forged close ties with centre-right leaders across Europe and was endorsed
by Angela Merkel, Germany's chancellor. By contrast, Christofias – the EU's
only Communist leader – was often isolated.
José Manuel Barroso,
president of the European Commission, interpreted Anastasiades's victory as “a
strong mandate to implement his programme of reform and do what it takes to
ensure fiscal and financial stability”.
It remains unclear, however,
whether Anastasiades will be prepared to accept a large privatisation
programme, amounting possibly to €2bn, that is being advocated by the troika.
In Cyprus's political system,
the president is head of the government and Anastasiades, whose party is the largest
in parliament, will spend much of the coming week forming a new cabinet. Early
reports from Cyprus suggest that Michael Sarris, who has worked with the World
Bank, is likely to return to the post of finance minister, a position he held
in 2005-08. The new foreign minister is widely
expected to be Ioannis Kasoulides, a member of the European Parliament who was
the candidate of Anastasiades's party in presidential elections in 2008 and served as foreign minister in 1997-2003.
Cyprus's financial difficulties
have overtaken the division of the island as the main political issue in
Cyprus. But there are hopes that stalled reunification talks with the
Turkish-occupied north of the island could get a boost from the election of
Anastasiades, who supported a United Nations reunification plan that was rejected
by the Greek Cypriots in 2004.
Anastasiades has already
indicated one significant change of tack in foreign policy, saying that Cyprus
will apply to join NATO's Partnership for Peace.
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