Cyprus socialists sit on fence in runoff vote

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February 20, 2013 7:49 AM EST

Cyprus's socialist party sat on the fence on Tuesday for upcoming elections closely watched by investors as the island teeters on the brink of default, saying it could not back either candidate in a presidential runoff scheduled for February 24.

Sunday's vote pits Nicos Anastasiades, a conservative in favour of a swift bailout deal with international lenders, against Communist-backed Stavros Malas, who supports a bailout but with fewer austerity measures.

Both must lure more voters from the political centre to get ahead, even though Anastasiades is a clear favourite with an 18-point lead over Malas.

EDEK, the small socialist party which supported third-placed independent George Lillikas who gleaned 25 percent of the Feb 17 vote, said it wouldn't back either remaining candidate.

"The positions (of the party) ... do not permit it to position itself in favour of a candidate in the second round of the presidential elections," EDEK spokesman Demetris Papadakis said.

Papadakis said it was a unanimous decision of party members which would be put to EDEK's decision-making committee scheduled to meet on Thursday.

Investors are closely watching Sunday's vote, worried that continued delays in Cyprus clinching a desperately needed financial bailout could trigger further economic turmoil in the euro zone periphery just as it was beginning to recover.

The island's bid for international financial support, made eight months ago, has been delayed by an incumbent leftist government slow to negotiate bailout terms, worries by lenders over the island assuming a mountain of debt it may not be able to afford to repay and German charges that Cypriots are lax on tackling money-laundering.

Cyprus sought aid after its banks suffered huge losses on exposure to a restructuring of Greek sovereign debt, and difficulties in accessing international capital markets shut to it because of fiscal slippage since mid-2011.

Positions of both candidates, Papadakis said, were not "in alignment" with the positions of EDEK. He did not elaborate.

EDEK, which has a support base of 9 percent based on the 2011 parliamentary election results, is the only party officially supporting Lillikas. His remaining support base is thought to come primarily from dissidents within the centrist Democratic Party, which officially supports Anastasiades.

Lillikas, who has said he would announce his own decision on whether to back a candidate on Friday, has been critical that terms of a bailout deal now under discussion with the European Union and the International Monetary Fund could be too harsh.

Under its outgoing Communist government, which now backs Malas, Cyprus has introduced public sector pay and benefits cuts along with tax increases in anticipation of a bailout.

Incumbent President Demetris Christofias, elected in 2008, is not seeking a second term.

(Reporting By Michele Kambas; Editing by Michael Roddy)

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