* Conservative chief must finalise bailout deal
* Anastasiades sets about forming government for March 1
* Economist Michael Sarris takes over as finance minister
* President-elect says committed to reforms, deal in March
* EU/IMF bailout talks inconclusive after eight months
By Michele Kambas
NICOSIA, Feb 25 Cypriot president-elect Nicos
Anastasiades, armed with a clear mandate from voters to spare
the island from insolvency, said on Monday he was committed to
reforms in return for a financial bailout.
The Conservative Anastasiades won decisive backing in a
presidential election on Sunday for an aggressive approach to
resolving the island's worst financial crisis in four decades.
Less than 24 hours after his resounding victory on Sunday,
Anastasiades said he would appoint Michael Sarris, a former
World Bank economist who enjoys broad respect at home and
abroad, as his finance minister.
Anastasiades has promised a quick deal with foreign lenders
and to bring Cyprus closer to Europe, in a shift from the
policies of the outgoing Communist government that first sought
aid from Russia before turning to the European Union.
"Long-term prospects for Cyprus are excellent as we are
committed to carrying out necessary structural reforms. We only
need a helping hand now," Anastasiades told Germany's Bild
newspaper, according to advance excerpts of an interview to be
published in Tuesday's edition.
Christopher Pissarides, a Nobel laureate for economics in
2010, was appointed head of a group of consultants to the
government on the economy.
Sarris, a soft-spoken and down-to-earth economist known to
many Cypriots by his first name, successfully ushered Cyprus
into the euro zone during a stint as finance minister between
2005 and March 2008 under a previous centre-left government.
He had refused a ministerial appointment by the outgoing
Communist-led government in mid-2011, saying he needed a clear
mandate to handle a then-looming financial crisis.
"I think it is a very strong choice, he is clearly respected
in the EU but also in the U.S., which could be important for
getting IMF support for a bailout." economist Fiona Mullen said,
referring to Sarris's appointment.
SMALL ISLAND, BIG PROBLEM
Eight months of talks on a bailout package have turned
Cyprus, one of the euro zone's smallest economies, into a big
headache for the currency bloc, triggering fears of a financial
collapse that could reignite the European debt crisis.
Anastasiades will be sworn in on Feb. 28, and fully assume
duties on March 1. With state funds depleting rapidly and a 1.4
billion euro ($1.9 billion) debt maturing in June, he has little
In a joint statement on Monday, the French and German
finance ministers said talks must begin with prospective lenders
soon so a deal can be reached by the end of March.
Cyprus sought aid from the EU and the IMF last June, after a
Greek sovereign debt restructuring saddled Cypriot banks with
losses. It is expected to need up to 17 billion euros in aid -
about the size of its entire economy.
"There is a pressing need to recapitalise our banking
sector," Anastasiades told Bild. "I agree with Germany and
France that we should reach an agreement by March."
Virtually all rescue options - from a bailout loan to a debt
writedown or slapping losses on bank depositors - are proving
unpalatable because they push Cypriot debt to unmanageable
levels or risk hurting investor sentiment elsewhere in the bloc.
Although a draft bailout deal says banks may need "up to" 10
billion euros to recapitalise, a banking source said an asset
review still under wraps has earmarked between 5.98 billion and
8.86 billion euros for banks.
With Cyprus's fiscal needs at 7.0 to 7.5 billion over the
next four years, the final bailout could reach 16 billion euros.
German misgivings about Cyprus's commitment to fighting
money laundering and its strong financial ties with Russia -
which has already extended a 2.5-billion-euro loan to the nation
- have further complicated negotiations.
Known for his no-nonsense style and impressive access to
European policymakers such as German Chancellor Angela Merkel,
Anastasiades took 57.5 percent of the vote in the run-off
election, 15 points ahead of his anti-austerity Communist-backed
rival Stavros Malas.
"Money laundering is a global problem and no country can
remain immune to this problem. However I believe the comments
about Cyprus are wrong and exaggerated. We have gone through
proper checks," Anastasiades said.
The island was ready to agree to further inspections by
international or European committees and take on board proposals
for improvement, he said.
Cyprus has been shut out of international capital markets
for almost two years, with the outgoing administration resorting
to heavy borrowing from state-owned corporations to pay public
Yet prices on the island's internationally traded bonds have
rallied in recent weeks. The quoted yield on a Cypriot 10-year
benchmark bond has fallen to an 18-month low
of 9.45 percent, according to Thomson Reuters data.