CYPRUS HAS INCHED closer to requiring an EU-IMF bailout, after the junior partner in its ruling coalition withdrew from power amid disagreements about talks to reunify the island.

The withdrawal of Marios Garoyian’s DIKO party, which holds 9 seats in the 58-member parliament, leaves President Dimitris Christofias’s AKEL with just 19 seats and leaves the president politically isolated.

It will also make it more difficult for Christofias’ administration to pass spending cuts and economic reforms, which have become more urgent since a major explosion last month left almost half of the island without electricity.

Government spokesman Stefanos Stefanou told AP that Christofias ‘regretted’ DIKO’s withdrawal, and would proceed with a Cabinet reshuffle in the coming days.

“The aim is for the new government is to confront the challenges our country faces with dynamism and determination,” said Stefanou.

The two parties only entered coalition just over two months ago, following an election in May. Christofias has been under a constant barrage of criticism over the explosion of 98 munitions-filled containers at a naval base last month.

The Iranian containers were seized in 2009 from a Cypriot-flagged vessel that the UN said was contravening its arms embargo against Iran.

Many Cypriots saw the explosion as a result of official negligence and have called on Christofias to resign, which he has ruled out.

The explosion also wrecked the island’s main power station, the supplier of more than half of the country’s electricity supply.

The blast is also expected to take a heavy toll on the island’s €17.4bn economy, with EU estimates putting the overall cost at €2bn. Fixing the power plant will cost €700 million alone.

The resulting strain on public finances prompted Central Bank governor Athanasios Orphanides to warn that Cyprus may be forced to seek a bailout if planned spending cuts  - especially on the state payroll, which accounts for over a quarter of all government spending – cannot be expanded and pushed through parliament.

Additional reporting by AP