Cyprus elects president tasked with sealing bailout

NICOSIA Sat Feb 16, 2013 6:46pm EST

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NICOSIA (Reuters) - Cypriots vote on Sunday to elect a president tasked with negotiating a financial rescue to save the small island nation from a bankruptcy that would reignite the euro zone debt crisis.

Cyprus's worst economic crisis in four decades has blown away the island's divided status as the main issue in this year's elections, which conservative leader Nicos Anastasiades is tipped to win.

Polls show Anastasiades, the most pro-bailout figure among the main presidential contenders, has a 15-point lead over his closest leftist rival, Stavros Malas, but may not secure the outright majority needed to avoid a run-off a week later.

He has promised a quick agreement with the European Union and International Monetary Fund on a bailout, a deal investors want thrashed out before the island's troubles derail progress made in shoring up the rest of the euro zone's periphery.

Nailing down a deal has proved tricky because almost any way of solving the crisis - from restructuring debt to slapping losses on banks - could set a precedent for other troubled states and hurt fragile confidence in financial markets.

Fears that the island will never be able to pay back its debt, German misgivings about its commitment to fighting money laundering and strong links to Russia have further complicated talks on a rescue, which have dragged on for eight months.

"Everything is at stake, like it has never been before," said Kyriakos Iacovides, publisher of the Cyprus Mail newspaper.

"The country must be rebuilt, Cyprus must be rehabilitated in the EU. We need a strong leadership to rebuild the country."

Cyprus sought financial help last year after its banks suffered huge losses from Greece's sovereign debt restructuring. The island, which has been shut out of international financial markets since May 2011, needs about 17 billion euros in aid - a sum worth as much as its entire economy.

JADED

Cyprus has a presidential system of government where the head of state wields executive power. Incumbent Demetris Christofias, the EU's only Communist leader, has bowed out amid accusations of the EU "persecuting" Cypriots during bailout talks.

Just over half a million Greek Cypriots are expected to cast their vote for the man to lead the nation for the next five years when polls open at 0500 GMT. A runoff will on February 24 if no candidate receives more than 50 percent of votes cast.

The last polls showed Anastasiades with just over 40 percent share of the vote, comfortably ahead of the Communist-backed Malas and the other main challenger, independent George Lillikas.

"What we have are two weak candidates against a potentially unpopular figure. Anastasiades is a polarizing figure in Cypriot politics, respected but not necessarily liked," said Hubert Faustmann, an associate professor at the University of Nicosia.

"The economy has dominated, and this must be one of the dullest election campaigns I have ever seen. Somehow it hasn't electrified people, they could be jaded."

Anger at unemployment hitting a record high of 15 percent has cast a pall over campaigning, where rival candidates have jockeyed to cast themselves as the best man to steer Cyprus through its troubles.

Anastasiades has run on a slogan declaring "The crisis needs a leader," while Malas has retorted with a campaign proclaiming "The crisis needs a credible leader".

Reuniting the island after its division nearly 40 years ago into a breakaway Turkish Cypriot state in the north and the internationally recognized southern state run by Greek Cypriots has lagged far behind as an election issue.

Cypriots, still coming to grips with a cocktail of pay cuts, tax hikes and benefit cuts imposed last year in preparation for a bailout, have been little impressed with any of the rhetoric.

"Things will get better for Cyprus with a stronger leadership," said Marios Ioannou, 28, private sector employee.

"But people are angry with politicians and bankers for getting us in this mess. A lot of my friends have lost their jobs. This isn't the Cyprus we knew."

(Writing by Deepa Babington; Editing by Stephen Powell)

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