Mr Anastasiades’s
hopes of winning in the first round were dashed after a strong showing by
Stavros Malas, the Akel (communist) candidate, who took 27% to his 45%. George
Lillikas, a hardline nationalist, came third with around 25%. Observers were
surprised Mr Malas did so well, given the record of the outgoing Akel
president, Demetris Christofias. Thousands protested after an explosion in 2011
killed 13 people at a military base where confiscated Iranian munitions were
being stored. The blast destroyed the island’s biggest power station. Yet Mr
Christofias resisted calls to resign even when an official inquiry pointed to
government negligence.
Mr
Christofias also dragged his feet over the terms of a euro-zone bail-out,
hoping in vain that Russia would offer another strings-free loan. He had
earlier raised welfare benefits. The austerity to come may be harsher as a
result. The jobless rate doubled while Akel was in power, to almost 15% in
December. Yet fewer than one-quarter of communist voters defected. “In
left-wing Cypriot families, Akel is almost a religion,”says Hubert Faustmann, a
political scientist at Nicosia University.
Some other
parties share Akel’s sympathies. The 60,000-strong civil service is the biggest
employer and pays the highest salaries. For non-communists, the Democratic
party (DIKO) is the “go-to” party for a job in officialdom. Even Mr
Anastasiades’ backers oppose privatising telecoms, electricity, water and
ports. Yet lenders will demand such disposals, along with a freeze on pay and
pensions, on civil-service hiring and on social benefits. GDP will shrink by
1.7% this year, says the EU, and the budget deficit could hit 6% of GDP.
These
figures are trifling by the dire standards of Greece. But Cyprus will still
find it hard to earn its way out of trouble. The economy is too dependent on EU
tourism and financial services supplied to Russian-owned companies based on the
island. Large sums flow out from Cyprus back to Russia as “foreign investment.”
Cyprus makes sure it complies with the letter of EU anti-money-laundering
rules, but doubts persist about enforcement. Mr Anastasiades may have to accept
an audit of financial services by a private firm as a condition for a bail-out
deal.
One ray of
hope brightens the gloom: the discovery of natural gas in the seabed between
Cyprus and Israel. Noble Energy, an American company, estimates that there
could be 7 trillion cubic feet of gas in the Aphrodite field, found in 2011.
Oil deposits could lie beneath the gas. The Aphrodite field would pump huge
sums into government coffers for two decades after 2019, the earliest date for
gas exports, says Wood Mackenzie, an energy consultancy. This could help repay
a bail-out loan.
An energy
bonanza is no certainty. Extracting gas 1,500 metres below the seabed is
costly. Gas could be used at home, but a lot would have to be exported. A new
LNG plant would be uneconomic without much more gas, perhaps from Israel. A
pipeline to Greece would be expensive. Any solution needs a big investment by
outsiders in a risky and unstable region.
Or there
could be a shorter and cheaper pipeline to Turkey. Optimists hope the gas could
turn from being just another problem into a catalyst to reconcile Greek- and
Turkish-Cypriots, who have lived separately since a Greek-inspired coup
triggered a Turkish military intervention in 1974. Greek-Cypriot leaders talk
of sharing the wealth from natural gas with the poorer Turkish-Cypriot
mini-state in the north if the two are reunified. Yet several years of
UN-sponsored bilateral talks during Mr Christofias’s presidency have proved
fruitless. International advisers seeking to push the negotiations forward have
become especially exasperated by the Greek-Cypriot mantra that “nothing is
agreed until everything is agreed”.
Mr
Anastasiades may do things differently. He was the only Greek-Cypriot political
leader who chose in 2004 to support the Annan plan (named for the former UN
secretary-general) to reunify Cyprus as a two-zone federation with a limited
central government. Greek-Cypriots voted against this in a referendum by a
two-thirds majority, though it was overwhelmingly backed by Turkish-Cypriots in
a separate vote. It took years for Mr Anastasiades to regain political
credibility.
As
president he will be pressed by the UN and EU to restart talks. Cyprus’s economic
ills, compared with Turkey’s health, could make progress easier. But observers
of umpteen failed previous rounds will restrain their expectations.
The Economist 26/02/2013
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