Sunday

29th Jan 2023

Cyprus bailout in sight as new president elected

  • Fellow EU Conservatives endorsed Anastasiades at a meeting in Cyprus last month (Photo: European People's Party)

EU officials have welcomed the election of conservative leader Nicos Anastasiades in Cyprus, raising hopes of a speedier bailout deal for the troubled euro country.

Anastasiades won 57.5 percent of the vote on Sunday (24 February).

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He had already been endorsed by German Chancellor Angela Merkel during a meeting of centre-right leaders last month in Cyprus.

"We want Europe on our side. We will be absolutely consistent and meet our promises. Cyprus belongs to Europe," Anastasiades told supporters when exit polls were announced on Sunday night.

"We will restore the credibility of Cyprus in Europe and internationally. I promise you," he added.

Cyprus formally asked for a eurozone bailout last summer, as its cash-strapped banking sector is struggling with the consequences of a debt restructuring in Greece, part of Greece's own bailout deal in spring last year.

European Commission chief Jose Manuel Barroso, also a member of the centre-right European People's Party, on Sunday night said he personally, and in the name of the whole commission, welcomes Anastasiades' election.

"I spoke to Mr Anastasiades immediately after the result became known and I have assured him that he can count on the continued commitment of the European Commission to assist Cyprus to overcome the challenges it faces," Barroso said in a press release.

Eurogroup chief Jeroen Dijsselbloem, who chairs the meetings of eurozone finance ministers deciding on the Cyprus bailout, was also positive.

"I very much welcome his commitment to full cooperation with the Troika and to the resumption of programme negotiations without delay. It is in the interest of Cyprus as well as the euro area to reach an agreement rapidly," Dijsselbloem said.

"The Eurogroup stands ready to assist Cyprus in its adjustment effort in order to bring the economy to a sustainable growth path with sound public finances," he added.

The finance ministers of Germany and France jointly expressed their confidence for the bailout talks to "resume shortly with a view to reach an agreement before the end of March."

Outgoing Cypriot President Demetris Christofias, the only Communist leader of an EU country, had stalled talks on the €17bn bailout by refusing to allow privatisations to be part of the deal.

But in an interview with the Financial Times before the Sunday elections, Anastasiades also said that privatisations should be postponed for at least three years and warned against a German demand to have banks take losses and reduce the island's bloated financial sector.

He made the comments while still in campaigning mode ahead of negotiations with the troika of international lender on how to reduce the size of a bailout, as the €17bn would create too much debt for the country to pay back - over 140 percent of GDP.

Germany insists that the overall debt should be capped at 100 percent of GDP.

Revenues from privatisations, recently discovered gas reserves and a 'bail-in' contribution of the banking sector should cover the gap, says Berlin.

Concerns about money laundering on the tax-haven island, particularly by Russian and Ukrainian oligarchs, are complicating a bailout deal still further.

Meanwhile, Cypriots face a 15 percent unemployment rate as well as tax hikes and wage cuts, but Anastasiades will have little room for manoeuvre on further austerity measures demanded in return for the bailout.

A clear deadline to avoid bankruptcy is 3 June, when Cyprus has a €1.4 billion bond repayment. Last week, Standard&Poor's ratings agency said the risk of a Cypriot default is "material and rising."

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