Graffiti that reads “Troika get out,” in Limassol, Cyprus.
By NICHOLAS KULISH
Published: February 23, 201
LIMASSOL, Cyprus — Evagoras Georgiou will go to the polling station at the Tsireio middle school in the St. John neighborhood here for Sunday’s presidential election. But he will leave his ballot blank, voting for neither of the two candidates in the runoff for Cyprus’s most powerful political office.
Both candidates have promised to abide by a deal with international lenders that promises to help the country service its debts but that will bring harsh austerity and recession with it.
Mr. Georgiou, 28, studied business management in Britain and returned almost a year ago to look for work. He has yet to find a job and says he believes that a deal with the European Commission, the European Central Bank and the International Monetary Fund — known collectively as the troika — will only make matters worse.
“They both have the same policies but find a way to make the public believe they disagree,” Mr. Georgiou said of the two candidates. “We see that any country with a troika agreement is ridden with debt and has high unemployment of youth.”
What many Cypriots find most frustrating is that their crisis, like those in Ireland and Iceland before them, was concentrated in the banks. There is no sovereign debt crisis and, before the banking collapse, their economy was relatively healthy. Why, they wonder, should they suffer for the misdeeds of a few bankers? Why cover losses that should be borne, at least in part, by private investors?
This small Mediterranean nation goes to the polls at a moment of rising uncertainty and apprehension. Nicos Anastasiades, the leader of the conservative party Democratic Rally, is expected to best Stavros Malas, who is backed by AKEL, the Communist party.
Mr. Anastasiades comes from the same conservative bloc in Europe, the European People’s Party, as Chancellor Angela Merkel of Germany. Ms. Merkel came here for a party conference in January and met with Mr. Anastasiades at that time.
But on the subject that preoccupies many Cypriots, the anticipated bailout, the difference between the two candidates may be slim. Mr. Malas has called for a softening of the harshest austerity measures but otherwise has promised to stay the course with the sort of budget-slashing measures advocated by Germany that have led to deep recessions in other European countries.
“Fundamentally, the average Cypriot and even the average politician realizes this model being imposed by Germany all over Europe is flawed,” said Bambos Papageorgiou, who is a member of the Cypriot Parliament’s finance committee from AKEL and who used to work in the London derivatives market. “But our situation is such that we can’t avoid negotiating.”
Cyprus has known its share of adversity. The island has been divided since the Turkish Army invaded the northern part of the island in 1974. United Nations peacekeepers still patrol the buffer zone, which runs through the center of the capital, Nicosia.
Graffiti written in black spray paint near one of the blue and white guard posts at the edge of the zone on the Greek side reads “Troika Go Home.”
Cyprus has been unable to raise money in international bond markets for a year and has been kept afloat only by a loan of $3.5 billion from the Russian government. That allowed it to put off the final reckoning, which is now coming due.
In absolute terms, the bailout of Cyprus under discussion is quite small compared with the cost of keeping Greece afloat, around $22 billion compared with roughly $327 billion. But German politicians have balked at what they see as a bailout for Russian oligarchs and money launderers, who they say keep their money in Cypriot banks.
Cyprus signed a memorandum of understanding with the troika in November, cutting salaries for government workers by up to 15 percent. Additionally, public pension payments were pared back by as much as 10 percent, and the value-added tax will rise. Both sides decided to wait until a new government was in place to complete the bailout.
In the meantime, Cyprus’s economy shrank by roughly 2.3 percent last year, according to preliminary estimates by the government statistics office, driving the unemployment rate up to 14.7 percent by the end of the year.
Though frustrated, European voters have tended to hold their noses and vote for pro-bailout candidates, as they did in Greece last year when Antonis Samaras eked out a victory over Alexis Tsipras’s radical-left Syriza. But political analysts wonder how long their patience will hold as austerity measures punish the most indebted countries and their pared-back spending pulls down even the Continent’s healthier economies.
And there is little hope for a rapid recovery. The European Commission said Friday that the economy of the euro zone would shrink 0.3 percent in 2013. The commission also forecast that Cyprus’s economy would shrink 3.5 percent this year and 1.3 percent in 2014.
Marios Mavrides, a member of Parliament with Democratic Rally and a professor of economics at the European University Cyprus, predicted that as the deep budget cuts mandated by the troika began to bite, recession would last all the way into 2015.
“We need to go through a deep recession. There’s no other way,” Mr. Mavrides said. “The banking system is virtually hanging from a single thread.”
The mood is especially pessimistic among young Cypriots. “I don’t see any future for the young generation,” said Marios Georgiou, 30, a sales representative in Nicosia, who said he was saving money to emigrate, possibly to Australia or Canada.
In the meantime, property developers have started placing their hopes on Asian investors. The highway between Limassol and the resort town of Paphos is lined with billboards advertising property in Chinese characters. Christos Charalambous said that his employer, Kleanthis Savva Developers, had several dozen clients from China.
“We hope that this year things will turn around. Last year was the worst that I can remember in the real estate business,” said Mr. Charalambous, who has worked in the industry for a decade. “If 2013 is worse than 2012, many businesses will default.”
There is hope on the horizon, in the form of substantial natural gas reserves discovered in the waters between Cyprus and Israel. Recalling the difficult period four decades ago after Turkey invaded, Andreas Christou, Limassol’s mayor, said he remained optimistic. “We shall find a way to survive,” he said.
Andreas Riris contributed reporting.