By Michele Kambas
NICOSIA (Reuters) - Cypriots vote in a runoff on Sunday to elect a president who must clinch a bailout deal so the island nation can avoid a financial meltdown that would revive the euro zone crisis.
Conservative leader Nicos Anastasiades, who favors hammering out a quick deal with foreign lenders, is favored to win against Communist-backed rival Stavros Malas, who is more wary of the austerity terms accompanying any rescue.
Financial markets are hoping for an Anastasiades victory that speeds up a joint rescue by the European Union and International Monetary Fund before the island runs out of cash and derails fragile confidence returning to the euro zone.
The 66-year-old lawyer took more than 45 percent of the vote in last Sunday's first round, easily beating Malas who took 27 percent. An anti-austerity candidate who finished third refused to back either contender, boosting Anastasiades' chances.
The winner takes the reins of a nation ravaged by its worst economic crisis in four decades, with unemployment at a record high of 15 percent. Pay cuts and tax hikes in preparation for a bailout have further soured the normally sunny national mood.
"Whatever happens in this vote, the day after is going to be very difficult for Cyprus," said Demetris Charalambous, a 56-year-old convenience store owner. "People are really depressed. Business is bad, we are at risk of shutting down."
Prospects for a quick bailout that revives the sinking Cypriot economy - which the EU says will shrink a worse than expected 3.5 percent this year - have been equally grim.
Talks to rescue Nicosia have dragged on eight months since it first sought help, after a Greek sovereign debt restructuring saddled its banks with losses. It is expected to need up to 17 billion euros in aid - worth the size of its entire economy.
Virtually all rescue options - from a bailout loan to a debt writedown or slapping losses on bank depositors - are proving unfeasible because they push Cypriot debt up to unmanageable levels or risk hurting investor sentiment elsewhere in the bloc.
German misgivings about the nation's commitment to fighting money laundering and strong financial ties with Russia have further complicated the negotiations.
Longstanding anger over the island's 40-year-old division into the Greek-speaking south and Turkish north has been relegated to a distant second as an election issue this year, with both candidates vying to portray himself as the right man to lead the country out of its financial quagmire.
"We must end the uncertainty and give Cyprus back its lost international credibility and its prestige in Europe," Anastasiades said as he ended his campaign.
A heavy smoker known for his no-nonsense style, Anastasiades is widely respected but suffered political humiliation nine years ago when he supported a United Nations blueprint to reunify the island that was later rejected by the public.
He has suggested the island may even need a bridge loan to tide it over until a rescue is nailed down.
His younger rival Malas is handicapped by the support of the incumbent Communists who are perceived as having mismanaged the economic crisis and a munitions blast in 2011.
Still, he is expected to get a boost from his pledges to drive a hard bargain with lenders and anti-austerity rhetoric that resonates with many Cypriots struggling to make ends meet.
"I want to see someone worthy win, who will cut out cronyism and be decisive about the problems we have," said George Nearchou, 58, an unemployed electrician.
"I am however very worried about austerity, people are very angry. I see a popular uprising."
(Writing by Deepa Babington; Editing by Stephen Powell)
(c) Copyright Thomson Reuters 2013. Check for restrictions at: http://about.reuters.com/fulllegal.asp