FOLLOWING months of speculation, Finance Minister Makis Keravnos resigned yesterday to take up a senior position with Hellenic Bank, prompting questions from opposition DISY as to how a government minister could be allowed to negotiate for a position in the private sector while still in office.
Speaking after a 50-minute meeting with President Tassos Papadopoulos yesterday morning, Keravnos, who previously served as Minster of Labour under the current government, said: “My resignation is the result of my decision to accept a proposal to undertake a place in the private sector.”
Keravnos will take the position of Chief Executive Officer at Hellenic, the island’s third largest bank. The Hellenic board will meet today to endorse the appointment. “Provided it is endorsed by the board of directors, I am taking up the Chief Executive Officer position,” keravnos said.
He will be temporarily replaced in the Finance Ministry by Communications and Works Minister Haris Thrasou until a permanent replacement is appointed by the Cabinet.
It is believed Papadopoulos did not want Keravnos to resign and had tried to persuade him to change his mind.
“Among the scenarios discussed with the president was for the minister to remain at his post,” said Nicos Cleanthous, vice-chairman of DIKO, after the meeting with Papadopoulos and Keravnos.
Keravnos was appointed Finance Minister in early 2004, taking on a budget deficit which then exceeded five per cent of GDP and public debt exceeding 70 per cent.
An economist who specialised in human resources training, his first public appointment was as Labour Minister in 2003.
His deficit-busting gameplan included an agreement by civil servants to increase retirement ages and cut down on pension bills, government outsourcing and slashing overtime pay in the civil service.
Based on the pledges to cut the deficit to 1.7 per cent by the end of 2006 and show declining public debt – expected to fall to 66 per cent of GDP next year, Cyprus entered the European Exchange Rate (ERM 2) mechanism in April.
Asked about “bailing out” at a critical time for the economy, Keravnos said: “Yes surely it’s a transient period which is difficult for our economy and each adaptation is difficult, but I am convinced that the Cyprus economy has all the conditions in place that will ensure growth and prosperity.”
A statement from DISY yesterday questioned how correct it could be that a Finance Minister in office could have negotiated a place in the banking sector. It also said it left unclear the situation with regards to the government’s tax negotiations with the Church, which has a large interest in Hellenic Bank.
“DISY wonders where this leaves the Finance Minister Makis Keravnos and the government with regards to the Church’s tax obligations,” the statement said.
Government Spokesman Kypros Chrysostomides said yesterday the negotiations with the Church had been going on for a long time. In any case he said he did not know to what extent the Church was involved in Hellenic Bank.
Responding to the DISY statement, Keravnos said: “The DISY statement is unworthy of any comment. I want to believe that this statement does not represent the political morals of the leadership of DISY.”
Hellenic Bank has not been without its share of controversy this year. In March, the banks announced the appointment of Andreas Moushiouttas, also a former Labour Minister, as the new vice-chairman of the board to replace Constantinos Loizides, who resigned after shareholders began expressing their concerns over increased bad debts provisions in Greece that were affecting the bank’s profitability. The bank also appointed Andreas Panayiotou, a former minister, and Demetris Eliades as new board members in March.
On Monday, the bank announced it had posted a 16 per cent increase in first-half ordinary operating profit, but saw net profit fall on the back of higher provisioning costs.
The bank said operating profit rose to £15.5 million from £13.4 million in the first half of 2004.
Net profit was down 62 per cent to £996,000, weighed down by a 36 per cent increase in bad debt provisioning.
