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After election win, Anastasiades tackles Cyprus bailout

NICOSIA (Reuters) - 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.

Newly elected President of Cyprus Nicos Anastasiades waves to supporters during a proclamation ceremony at Eleftheria stadium in Nicosia February 24, 2013. REUTERS/Yorgos Karahalis

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 center-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.


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 February 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 time.

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 sector salaries.

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.

Editing by Michael Roddy