UPDATE 5-Cyprus conservative wins first round of presidential vote, faces runoff

Sun Feb 17, 2013 2:51pm EST

* Anastasiades gets 45.4 pct share after all votes counted

* Runoff set for 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 easily won the first round in Cyprus's presidential elections but failed to avoid a runoff vote, reflecting deep divisions among Cypriots on a bailout 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, clinch victory and secure a bailout, even though that too, has its drawbacks.

Analysts said the 66-year-old lawyer looked likely to win the Feb. 24 run-off, but that the strong combined showing of his two main rivals who campaigned against austerity showed the depths of anti-bailout anger in the nation.

"It is a victory for the forces who want us to turn a page," Anastasiades, 66, said after the results were announced.

A lawyer who has led the Democratic Rally party since 1997, he secured a 45.4 percent share of the vote, well ahead of leftist Stavros Malas who trailed with 26.9 percent. George Lillikas, an independent, took 24.9 percent of the vote.

"This result means that Cypriots have not quite decided if Anastasiades is the man to get them out of the crisis. It will be a tough second round," said Fiona Mullen, an economist at the Sapienta consulting firm.

"It makes it a bit tougher for Anastasiades to persuade EU leaders that Cyprus is on the right path, that they will do what it takes to get a bailout."

If successful in the runoff, Anastasiades faces a long list of challenges in convincing European Union and International Monetary Fund lenders to sign off on a rescue before the tiny state faces a 1.4 billion euro debt repayment in June.

He will have to assuage fears that Cyprus will never be able to pay back its debt, and quell concerns in northern Europe that the island is a hub for laundering money from Russia.

Talks on a rescue, which have dragged on for eight months, have also 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.

COUNTRY'S SURVIVAL

With rising anger at record unemployment of 15 percent and a round of belt-tightening, the eastern Mediterranean nation's worst economic crisis in four decades has eclipsed its almost 40-year-old partition as the main issue in this year's election.

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.

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.

Malas has campaigned on a pro-bailout but anti-austerity platform while Lillikas has rejected onerous terms tied to any bailout, saying Cyprus could swiftly extricate itself by using the natural gas reserves that lie under its shores.

Potential kingmaker Lillikas declined to say who he would support in next week's runoff, but Malas signalled he would look to join forces with his fellow anti-austerity crusader.

"We have a lot in common with those who supported George Lillikas; we have a lot in common, historically, and on the specific problems that Cyprus now faces," Malas, 47, told supporters. "Together we can deal with the crisis with development and without harsh policies against society."

European Central Bank board member Joerg Asmussen said he hoped a bailout could be struck with the new Cypriot government by the end of March after the elections, the outcome of which he said the ECB was neutral on. It was not clear whether he knew when he was speaking that there would be a second round.

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 but some felt things could only get better from here.

"We have reached the bottom and we need someone trusted by Europe so that Cyprus can start developing again," said Lucy Iasonos, 52, one of hundreds of Anastasiades supporters who gathered outside his party offices to celebrate.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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