politics

Cyprus’s Economic Rebound Helps Incumbent in Presidential Election

  • Cyprus holds first round of presidential elections on Jan. 28
  • Economy, not reunification, to again dominate voter concerns
Nicos Anastasiades Photographer: Iakovos Hatzistavrou/AFP via Getty Images

Nearly six years after Cyprus came close to financial collapse, Nicos Anastasiades is seeking to ride the Mediterranean island’s economic recovery to a second term as president.

With Cyprus’s economic growth outstripping the euro-area average, polls all suggest that Anastasiades, 71, is set to win the most votes on Jan. 28, albeit short of an absolute majority. He is then forecast to go on to secure re-election in the Feb. 4 run-off, regardless of his opponent.

“The potential electoral victory of Anastasiades is due to the economy,” said Harris Papageorgiou, manager of Nicosia-based Noverna Analytics & Research. “He has convinced voters that the economy is doing better and citizens expect further improvement.”

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 ($12.5 billion) bailout, to a model of economic adjustment. It returned to economic growth in 2015, after making a comeback to international bond markets in 2014.

Bailout Program

In June 2012, the country became the fifth euro-area member to request international aid. At the time of Anastasiades’s first election, 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 2012’s 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.

Despite robust growth, the country’s banks need to substantially step up reduction of non-performing loans as part of Cyprus’s efforts to sustain growth over the medium term, according to the International Monetary Fund, the European Commission and the European Central Bank. Anastasiades, who helped navigate the country out of its financial turmoil when elected in 2013, is overseeing the nation’s efforts to become a possible hub for exporting natural gas while also pushing exploration in its own waters.

The real race in the first round of elections is who will place second to go through with Anastasiades to the run-off vote. Polls show Stavros Malas, backed by the leftist Akel party, and centrist Diko party leader Nikolas Papadopoulos vying for second position.

Economy, Not Reunification

The 2013 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 solve 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,” Papageorgiou said.

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