Cyprus Runoff May Determine Its Economic Fate

On Sunday, Cyprus will hold runoff presidential elections between conservative candidate Nicos Anastasiades and the left-leaning Stavros Malas. The election will likely determine whether Cyprus, one of the eurozone’s economic trouble spots, will accept a bailout from the European Union in exchange for economic reforms or risk a bankruptcy that will aggravate the eurozone crisis. Anastasiades, the conservative, pro-bailout candidate, is favored to win. Demetris Christofias, the current president, has resisted meeting the tough terms of the bailout. The European Union, meanwhile, has not hidden its hopes for an Anastasiades victory. James Ker-Lindsay, a senior research fellow who studies the politics of Southeastern Europe at the London School of Economics, said that the international community has never followed a Cypriot election so closely. “Everyone is watching this election because of the bailout, because small Cyprus has become the main focus of the attention on Europe’s economic crisis,” he said. “Cyprus has been for 50 years off and on a center of international attention, but it has always been about the politics of the island, the division of the island.” The island of Cyprus is ethnically divided between Turkish Cypriots in the north and Greek Cypriots in the south; the Turkish portion declared in 1983 it would secede and form the Turkish Republic of Northern Cyprus, but only Turkey recognizes its government. But Cyprus is now in the news for a different reason. “Now, when people refer to the Cyprus problem, they are talking about the economic situation, not the political situation,” said Ker-Lindsay. Should he win the runoff, Anastasiades, who won 45.4 percent of the vote in last weekend’s first-round elections, would need to finalize a rescue package to avert bankruptcy. “Anastasiades has two Cyprus problems on his hands: the economic and the political,” said Ker-Lindsay. But Anastasiades’ short-term priority will be the economic problem. Ker-Lindsay explained that there are four main political parties in Cyprus, and that the smaller parties “serve as kingmakers, with an inordinate amount of power -- more power than they should rightly have.” Anastasiades’ center-right Democratic Rally (DISY) and the communist Progressive Party of Working People (AKEL), which supports Malas, each tend to capture 30-35 percent of the vote, he said. Meanwhile, the smaller center-right Democratic Party (DIKO), tends to get around 14-16 percent of votes, according to Ker-Lindsay, while the socialist Movement for Social Democracy (EDEK) tends to get around 8 percent of the vote. DIKO, which Ker-Lindsay described as taking a hard line on the political issues in Cyprus, is supporting Anastasiades for the presidency, despite disagreeing with his policies on reunification. “DIKO is a rejectionist party,” explained Ker-Lindsay. “It doesn't want the solution that is really on the table, which is a bi-zonal, bi-communal federation,” he said. “Greek Cypriots accept it grudgingly, but they really don't like it and DIKO certainly doesn't like it.” Anastasiades, Ker-Lindsay said, is known to favor more of a loose federation, an idea that is “taboo among Greek Cypriots” and that DIKO “hates.” All the more reason, Ker-Lindsay explained, for Anastasiades to prioritize economic concerns over reunification hopes. In addition to the EU, Russia is also keenly interested in the outcome of the weekend runoff elections, similarly for economic reasons. “The Russians have already put large amounts of money into the Cyprus economy,” said Ker-Lindsay. “They know the mess Cyprus is in, and they are not going to want to put money in and have no chance of getting it back,” Ker-Lindsay said. He said Russia hopes to see Cyprus make economic reforms. “They can only lend so much money out of friendship.” If Anastasiades wins as expected and manages to forge a workable package of economic reforms, there will remain challenges, Ker-Lindsay explained, particularly when it comes to divisions with DIKO over reunification. “But in terms of the real issue that everyone is focusing on here, the economy, [Anastasiades] is seen as the best hope for getting it sorted,” Ker-Lindsay said. Photo: Cypriot presidential candidate Nicos Anastasiades, Brussels, Belgium, Feb. 9, 2011 (photo by the European People's Party licensed under the Creative Commons Attribution 2.0 Generic license).

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