UPDATE 4-Cypriot conservative chief leads in vote, faces runoff

Sun Feb 17, 2013 1:02pm EST

* Anastasiades gets 45.3 pct share after most votes counted

* Runoff set to be held Feb. 24 against leftist rival Malas

* New president must negotiate deal with EU, IMF

By Michele Kambas and Deepa Babington

NICOSIA, Feb 17 (Reuters) - Conservative leader Nicos Anastasiades grabbed a commanding lead in Cyprus's presidential election but failed to avoid a run-off next week, in a setback to investor hopes for a swift deal to save the island nation from bankruptcy.

A financial crash in Cyprus could reignite the euro zone debt crisis and investors are keen to see Anastasiades, the strongest advocate of an international rescue deal likely to come with harsh conditions, clinch victory and secure a bailout.

The eastern Mediterranean nation's worst economic crisis in four decades has eclipsed its almost four-decade-old partition as the main issue in this year's election.

Anastasiades, 66, a lawyer who has led the Democratic Rally party since 1997, led with 45.3 percent of the vote after 94 percent of the vote was counted, well ahead of leftist rival Stavros Malas, who took an average of 27.1 percent of the vote.

Exit polls earlier suggested Anastasiades might be able to secure just over 50 percent of the vote, which would have allowed him to avoid the run-off on Feb. 24.

A third contender, independent candidate George Lillikas, took 25 percent of the vote, according to the results so far.

COUNTRY'S SURVIVAL

Anastasiades has pledged a quick agreement with the European Union and International Monetary Fund on a financial rescue, which investors want agreed before the island's woes derail progress in shoring up the rest of the euro zone's periphery.

"It is the survival of our country which is at stake," Anastasiades said earlier on Sunday after voting in the port town of Limassol, accompanied by his three grandchildren.

Nailing down a deal has proven 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 damage sentiment just as confidence slowly returns to the euro zone.

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

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.

Reuniting Cyprus 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 by the election rhetoric.

"I hope that things will be better in terms of the economy and jobs, but I doubt it," said Georgios Poullos, a 41-year-old who is unemployed. "It's not in our hands. I think whoever gets in won't change it."

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