IT WAS very surprising to hear Finance Minister Kikis Kazamias offer public support to the governor of the Central Bank Athanasios Orphanides. He is after all a member of the government that has been at loggerheads with the governor and publicly criticised him on countless occasions.
Kazamias’ predecessor Charilaos Stavrakis wrote about the ‘bad relations’ he had with Orphanides when he was minister, in his recently published book, and accused the governor of not exercising adequate control over the banks. Stavrakis castigated the governor’s unwillingness to intervene in the Bank of Cyprus’ takeover of a Russian bank (so that a lower price could have been secured) and suggested that he could have prevented the over-exposure of Cyprus’ banks to Greek government debt. This over-exposure, he believed, led to the repeated downgrading of Cyprus by the international rating agencies.
Similar criticism of the Central Bank has been made by other members of the government and its backers AKEL, which is why Kazamias’ support is so surprising. Yet the truth is that Kazamias, ever since his appointment has never tried to hide the fact that, in contrast to his predecessor and his AKEL comrades, he has a good working relationship with the governor, whom he often consults on issues relating to the economy and especially the banking crisis.
After the announcement of the big banking losses, it was announced that Kazamias and Orphanides had met to discuss a plan of action. Such co-operation was a positive development that would raise public confidence at a time when uncertainty seems to hover over the banking industry. Kazamias deserves congratulations for building bridges with the governor, an action that would not have been viewed very favourably by the presidential palace, which does not like independent state officials behaving as independent state officials and ignoring government wishes.
This is why the government is reportedly looking for a new person to replace Orphanides when his term expires at the end of next month. The governor, after all, ignored the government’s calls to sell the Central Bank’s gold reserves, he refused to pay the government ‘seigniorage’ (profit) from non-presented Cyprus pounds during the switch to the euro before its due date in 2017 and repeatedly called on the government to take measures to improve public finances. The government’s response, apart from public attacks, was to challenge the authority of the governor. Its appointees on the Central Bank board went to court claiming he did not have the authority to take decisions on his own, but they lost.
In his five years in charge, Orphanides behaved and acted as a model, independent state official, something quite rare. It is encouraging that the current finance minister appreciates the role the governor plays, even though his support might not be enough to persuade the autocratic President Christofias to give Orphanides another term.
