Cypriots elect Anastasiades as new president
Democrat Nicos Anastasiades was elected yesterday as new president of Cyprus with 57.48% of the votes. Euphoric supporters were pouring into the streets of the divided island, honking horns and waving blue and white Greek flags.
The Democratic Party leader stated that there were no winners or losers in this election as Cyprus has to be unified to face the new challenges and financial problems which lie ahead.Anastasiades confirmed that he will immediately start working on the bailout conditions with the Troika in order to sign an agreement as soon as possible. He explained that as a result Cyprus will be closer to Europe and that they will make an effort to follow European obligations. He also sent a message to the people of Cyprus that he will work to give back to Cyprus its stability and credibility. The new president task is not easy as he will have to negotiate a bailout to avoid a disastrous default. Cypriot banks alone face a £10 billion capital hole. The government can't afford to borrow that amount (equivalent to 50% of the GDP), since its debt is already approaching 100% of GDP, and therefore would become unsustainable. Germany, has categorically ruled out direct recapitalization by the European Stability Mechanism. That leaves the possibility of imposing loses on the providers of capital to the Cyprus banking system. But there is not enough equity and subordinated debt to absorb the losses, so depositors would somehow have to be bailed in too. How the Cyprus situation will be resolved could have profound consequences for the euro zone. Once again, its members must strike a balance between solidarity and sovereignty. Berlin's preference appears to be a traditional euro-zone can-kicking exercise. But euro-zone policy makers may not have the luxury of time, particularly if loose talk of depositor haircuts continues in a country where a quarter of deposits are foreign-owned with overnight notice. The long term future of the Eurozone is pending on Cyprus solution.
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