By Gareth Jones - Reuters

NICOSIA - Turkish Cypriots are to vote on Sunday in elections that could determine whether efforts to reunify Cyprus resume anytime soon and set the tone for Turkey's coming negotiations to join the European Union.

Turkey is the only country to recognize its self-styled administration in northern Cyprus and is hoping for a victory by outgoing Prime Minister Mehmet Ali Talat, who backs unification talks and closer ties to the EU. Talat called the elections crucial to showing that «Turkish Cypriots have changed» and want to reunite the island, and that «we will not return to the old line.»

Opinion polls suggest his Republican Turkish Party (CTP) will again be the biggest party in the 50-seat assembly with about 20 seats. But it would need support, possibly from outgoing coalition partner the Democratic Party, whose leader Serdar Denktash has said he would be willing to provide backing. Talat's main opponent, Dervis Eroglu's National Unity Party (UBP), which takes a more nationalist line and is more skeptical on Cyprus reunification, is seen as winning about 18 seats.

Talat, talking to Reuters in Nicosia, said the EU had not helped his cause by failing to deliver on promises to ease the north's decades-old economic isolation.

The EU has so far left the north isolated, despite the breakaway state's support for a UN peace plan last year, which was rejected by Greek Cypriots in the south.

The fundamental problem for Talat, and Turkey, is that the rest of the world, including the EU, recognizes the Greek-Cypriot government as the sole legitimate representative of the island.

After rejecting the UN plan, the Greek-Cypriot government joined the EU in May and has obstructed efforts to let northern Cyprus trade directly with the outside world, fearing this could lead to de facto recognition of the Turkish-Cypriot entity.

«The Greek Cypriots don't want us to breathe,» said Denktash, son of veteran Turkish-Cypriot leader Rauf Denktash.

Talat has been working hard to break down barriers and lure foreign investment, and hosted a group of American businessmen yesterday, to Greek-Cypriot annoyance.

A Greek-Cypriot politician paid the first visit to Turkey in 42 years last week in a sign of some improvement since an easing of restrictions in 2003 on crossing the island's ceasefire line. But diplomats say things remain deadlocked politically and Greek Cypriots show little interest in resuming talks.

Greece said yesterday that conditions were not right for a new initiative, with neither a framework for talks nor the essence of the talks in place.

«So I cannot estimate at this moment a time for such an initiative to start,» Greek Foreign Ministry Spokesman George Koumoutsakos told reporters. An Eroglu win could complicate Turkey's efforts to find a Cyprus settlement and ensure Ankara's EU talks begin smoothly in October.

(Additional reporting by Karolos Grohlmann in Athens)