By Michele Kambas

NICOSIA (Reuters) - Turkey's crackdown on government opponents and the imposition of a state of emergency following the abortive military coup last week has tempered hopes of a swift settlement on divided Cyprus.

Nicosia is watching with increasing trepidation how the fallout could hit reunification talks between Greek and Turkish Cypriots.

Turkey provides military and financial support to the breakaway Turkish Cypriot state in northern Cyprus. The turbulence in Turkey has so far not touched the enclave, home to at least 30,000 Turkish troops since Ankara invaded the island 42 years ago in response to a brief Greek-inspired coup.

But Turkey's crisis is unsettling for interlocutors hoping for a deal by the end of 2016, or at least before talks are hijacked by elections scheduled in the north and the south of the island in 2018.

Diplomats have previously said the current round of peace talks is the best chance in generations for ending a conflict that has become a perpetual irritant between NATO allies Greece and Turkey, and an obstacle to Turkey joining the European Union.

"Nobody actually knows if it will have an effect," said one official close to the peace process. "But it is overshadowing negotiations ... There are elements that are big unknowns."

Turkey's input is vital for solving the Cyprus conundrum, one of Europe's most enduring conflicts.

"We are talking about a system that will make all Cypriot citizens safe," said Cypriot Foreign Minister Ioannis Kassoulides. "In such a system there is no room for treaties of guarantee or the presence of Turkish troops," he told reporters in Athens.

Under a treaty which granted the former British colony independence in 1960, Britain, Greece and Turkey have intervention powers to restore constitutional order.

Among others, Ankara needs to agree to a pullout of Turkish troops, adjusting military-controlled boundaries between the north and south and writing off an estimated 17 billion euros ($18.8 billion) it considers as Turkish Cypriot debt to Ankara.

"If they don't write that off there is no way there can be a settlement," said the official.

Cyprus, whose Greek Cypriot-led government represents the whole island in the European Union, required an international bailout in 2013. An assumption of legacy Turkish Cypriot debt could financially smother the republic, which just emerged from the bailout program, the official said.

LOOSE CANNON

This week, air raid sirens marking the 1974 events in the north pierced the silence at dawn in the mainly Greek, southern parts of Cyprus. Turkish Cypriots, who call the invasion a "peace operation", celebrated a national holiday.

For James Ker-Lindsay at the London School of Economics, Turkey's crisis should be an impetus to islanders to sort out the conflict as soon as possible.

"Its a wake-up call for both sides...it doesn't appear like Turkey has any anchor to the West anymore. All the logic, seen from the outside, is that they (Cypriots) should get a solution, get a solution now," he told Reuters.

Although Turkish President Tayyip Erdogan had been "by and large constructive" on Cyprus, he is extremely unpredictable, said Hubert Faustmann, a political analyst.

"That's the problem. This guy can get up tomorrow morning and do a 180 degree turnaround," Faustmann said.

Cypriot reunification talks have typically floundered on issues ranging from re-drawing of boundaries between the two sides to property rights of thousands of displaced persons, or the status of tens of thousands of mainland Turks transferred to northern Cyprus after the war, a source of resentment to some Cypriots.

For a young family of Turkish mainlanders strolling in the scorching Nicosia heat, their allegiance was unmistakeable; taking turns, two youngsters, a boy and a girl, embraced a Turkish flag hanging outside a store.

The similarly designed but different in color Turkish Cypriot flag hanging on the door front of the shop next door was ignored.

(Editing by Jeremy Gaunt)