When sirens sounded at dawn on Wednesday they not only reminded Greek Cypriots of the Turkish invasion but also served as a wake-up call that Cyprus is on the brink of political and economic meltdown.

President Demetris Christofias is struggling to keep his government from imploding in the aftershock of a devastating July 11 munitions explosion at a naval base that claimed 13 lives and knocked out a key power plant.

The defence and foreign ministers have already resigned, and the junior government partner could pull out altogether as Christofias is assailed by unprecedented public protest over perceived administration incompetence.

Wednesday's "black anniversary" of the July 20, 1974 invasion has coincided with an outpouring of grief and outrage over July 11, 2011 -- now labelled Black Monday.

"We are all devastated by the loss of 13 people who lost their lives in the line of duty," official news agency CNA quoted Christofias as saying on Tuesday night at a presidential palace event marking the invasion anniversary.

He spoke as riot police prevented protesters from approaching the gate of the palace compound after allowing hundreds of his own supporters inside, an AFP correspondent said.

The blast tragedy comes with Christofias in presidential mid-term, his popularity in decline and his credibility creaking.

"Christofias has lost his appeal completely so I don't know what he can do. There's a lot of pressure on him from the people to resign," political commentator Sofronis Sofroniou told AFP.

"His position is untenable... Even if he finds a solution to the Cyprus problem he won't be able to sell it. He's a diminished president at a very critical time for Cyprus," he added.

The government's priorities now are saving the economy and keeping the peace process alive. It is struggling on both fronts.

Central bank governor Athanasios Orphanides has warned that Cyprus could be headed for an economic bailout in the wake of the explosion.

Dow Jones Newswires on Wednesday cited a letter sent by Orphanides to Cypriot President Demetris Christofias in which he warns that the Cyprus economy is in a state of emergency.

"To avoid the worst, including admission into a support mechanism, further and more drastic measures must be taken immediately," Orphanides, a member of the European Central Bank's governing council, said in the letter.

Rebuilding the power plant and importing energy is expected to cost up to one billion euros (1.4 billion dollars).

Things look no brighter on the political front.

Christofias is under pressure to deliver a peace blueprint in October when he and Turkish Cypriot leader Dervis Eroglu meet UN chief Ban Ki-moon.

Since UN-sponsored peace talks restarted in September 2008 there has been no tangible evidence of progress, and the international community is impatient.

Communist-backed Christofias came to power on a wave of popularity and a pledge to reunify the island after 37 years of division. He was viewed as a pro-settlement leader who could deliver that ever-elusive peace deal.

Now the United Nations wants a Cyprus solution before Nicosia takes up the European Union presidency in mid-2012.

Any peace accord must be ratified by Cypriots in twin referendums on both sides of the divide.

"People are already negative towards Christofias, and if he asks them to vote for a solution they will do the exact opposite of what he says," said Sofroniou.

"Christofias' position is untenable, but he will stick to it almost like (Libyan leader Moamer) Kadhafi."

Turkish Prime Minister Recep Tayyip Erdogan urged during a visit to Turkish-controlled north Cyprus on Wednesday that a solution be found before the end of the year, saying the negotiations "cannot carry on forever."

Erdogan also repeated statements he has made in the past few days that unless there is a solution before then, Turkey will freeze relations with the EU while Cyprus holds the union's rotating presidency next year.

Since July 11, Cyprus has witnessed its own mini "Arab spring" as thousands gather nightly outside the presidential palace, calling on Christofias to quit in the largest non-political rallies the island has ever seen.

There has been anger over the decision to allow the Turkish-held north to supply much-needed power to the government-controlled south -- the first time the wealthier Greek Cypriots have asked the Turkish Cypriots for help.

Cyprus Orthodox church Archbishop Chrysostomos II said he would rather "make do with a torch" than accept electricity from the north.

Businesses are also being allowed to lease generators from across the Green Line to help cope with rolling two-hour blackouts.

UN envoy Alexander Downer said this was exactly the kind of cooperation that helped to build confidence.

"We were pleased to see arrangements had been made to provide electricity from the north to the south, and we hope that people in Cyprus overall understand the positive message that that particular initiative sends," he told reporters after Christofias-Eroglu talks on Tuesday.

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