Cyprus Presidency Goes Into Runoff Round as Economy Dominates

(Bloomberg) -- Cypriots will return to the ballot box on Feb. 4 to choose a leader who can oversee the Mediterranean island’s economic recovery nearly six years after the country came close to financial collapse.

Incumbent President Nicos Anastasiades, 71, will face Stavros Malas in the runoff after taking 35.5 percent of the vote Sunday compared with 30.3 percent for Malas, an independent candidate backed by the leftist Akel party, according to Cypriot Interior Ministry figures. The two men also squared off in the 2013 presidential election that saw Anastasiades elected for a five-year term.

“A re-election of Anastasiades will mean continuity in current economic policy,” said Sofronis Clerides, professor of economics at the University of Cyprus. “Malas’s campaign was very careful and avoided big promises, nevertheless, the big question mark is how he will manage his relation with, and dependence on, the Akel party.”

Centrist Diko party leader Nikolas Papadopoulos was knocked out of the race after placing third with 25.7 percent. Just under 72 percent of registered voters cast a ballot compared with more than 83 percent in the 2013 election.

Cyprus has gone from a sick patient that came close to shattering the euro area in 2013, when a levy on deposits was imposed and capital controls introduced as part of a 10 billion-euro ($12.4 billion) bailout, to a model of economic adjustment. It returned to growth in 2015 after making a comeback to international bond markets the previous year.

Bailout Program

In June 2012, the country became the fifth euro-area member to request international aid. At the time of Anastasiades’s election in 2013, Cyprus had been shut out of debt markets for almost two years, with lenders including Bank of Cyprus Plc and the now shuttered Cyprus Popular Bank Plc losing 4.5 billion euros in the restructuring of Greek sovereign debt. Cyprus needed a bailout to recapitalize its lenders as well as to finance the government.

The country left its three-year-old aid program in March 2016 without a safety net and after using just 7.3 billion euros of the total loan. Cyprus’s economy will expand 3.7 percent in 2017 and 2.9 percent in 2018, according to a survey of nine economists by Bloomberg News. The popular vacation destination saw a near 15 percent increase in tourist arrivals in 2017 while retail and wholesale trade and construction are also driving economic output, according to the Cyprus Statistical Service.

Economy, Not Reunification

The last presidential election was the first where Cyprus’s economy was the main issue rather than reunification since the island was split. Cyprus has been divided since 1974, when Turkey invaded the northern third of the island following a coup by supporters of the country’s union with Greece.

Anastasiades has said that Cypriot reunification remains a priority and if re-elected he will keep trying to resolve the Cyprus issue after the latest talks to reunify the country ended in July without agreement. Malas has said that no solution to the Cyprus problem is as dangerous as a reunification deal that’s rejected by the electorate.

Despite the pressing issue of reunification, the economy is again the main concern of voters.

“The Cyprus problem isn’t top of the agenda because the public has tired of the issue and doesn’t expect an agreement in the near future,” said Harris Papageorgiou, manager of Nicosia-based Noverna Analytics & Research.

©2018 Bloomberg L.P.

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