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Cyprus Economy

Party's over new Cyprus president eyes credibility, Germany ties

25 February, 2013

In what was probably the most short-lived victory celebration in Cyprus history, president-elect Nicos Anastassiades wrapped up a six month long campaign with two speeches and a short press briefing on Sunday night, ready to start work on a multi-billion euro bailout from Eurozone partners and the IMF.

Expected to announce a cabinet of proven politicians and technocrats who will deal with a bankrupt economy and record unemployment, Anastassiades also has to face angry criticism within Germany about transparency surrounding billions of euros in Russian bank deposits.

How he deals with skepticism in Berlin and other leading Eurozone capitals will determine how soon Cyprus will secure a 17.5 bln euro bailout from its international lenders, in exchange for a drastic reduction in public sector spending, privatisations and a recapitalisation of its banks that were hit by the haircut of Greek government bonds.

At the same time, the 66-year-old lawyer will have to argue for a political settlement with Turkey over the island’s occupied territories in the north, at a time when some European Union leaders are desperate to lure Ankara to its fold, both as a nation of 90 mln consumers and also as a supposed peacemaker in the Middle East.

The only good news is the recent discovery of natural gas deposits off the southern coast and adjacent to Israeli gasfields, an area that Turkey wants to put a claim to in order to have a say in eastern Mediterranean affairs.

In an attempt to regain support within the EU, Anastassiades is widely expected to appoint Euro MP and European Popular Party vice chairman Ioannis Kasoulides as his next Foreign Minister, a post the 65 year old former presidential candidate held a decade ago.

Furthermore, he is expected to reinstate former World Bank executive and Finance Minister Michael Sarris to the cabinet post he held five years ago, a gesture that is expected to please European politicians who want to see extensive reforms in the island state, combined with sound policies on sustainability.

The new president, who officially takes office on Friday, March 1, will tap into his own Democratic Rally party as a source for Cabinet ministers, as well as to fill the new post of Deputy Ministers, while his main coalition partner, the smaller Democratic Party that was split over its support of rival candidates, will also contribute with government officials.

Already, Christopher Pissarides, a Cypriot who won the Nobel Prize in economics in 2010, is tipped to head a new department, the Council for Fiscal Policy, similar to the U.K.’s Office for Budget Responsibility, that will oversee the government’s growth plans and implementation of reforms and austerity.