IN MARKET economies, identified as capitalistic, the role of government is, in principle, as minimal and unobtrusive as possible, whereas in communist countries, economic activity is guided by complicated networks of government regulations.
Even when deviations from idealised forms of these two economic systems are allowed (i.e. when the competitive mechanism in the former does not function satisfactorily) the government hand remains light, while in the latter, even when some concessions are made to private initiative, the hand of the government remains inordinately heavy, and the strongly adverse effects of regulations increasingly stifle economic activity.
Within this framework, the absence of regulations regarding the operation of global mega-banks and other financial institutions proved to be at the core of the enormous losses inflicted upon millions of investors caused by unscrupulous money managers, who proved equally destructive as the suffocating regulators who led to the collapse of communism.
Slowly, new financial structures emerge, which are more closely regulated than in the past, yet the change appears to be only marginal, owing to the great difficulties from the high degree of penetration of the financial sector, much deeper now than any previous time, into all areas of economic activity.
The universality of this penetration dictates that the sector operates with absolute transparency and at arm’s length with its clients. If these criteria and high standards apply to the private financial transactions, they should apply more stringently to the relationship between the central banks and the supervised commercial banks.
Cyprus, of course, is not exempt from the rules of transparency and the conduct of operations at arm’s length. Yet from the recent shake-up of its banking sector caused by the statements of Mr Vgenopoulos and from other indications, citizens, unless given all the facts, are liable to conclude otherwise.
Mr Vgenopoulos suggested that the Arab consortium he represents in the Marfin Laiki Bank is a victim of double standards. His design to stop the freefall of the bank’s stock prices (as explained in my article in the Sunday Mail, June 7, 2009) was tantamount to an increase in the share of the Arab consortium. His explanation that all other Cypriot banks were also to be allowed to do the same is empty rhetoric because the other banks are not backed by the millions of dollars of Arab sheiks, as is Mr Vgenopoulos’. Thus only Marfin Laiki could benefit from any increase in bank ownership shares as provided by Cyprus law, not the rest of the banks.
What transpires from the whole commotion is that if Mr Vgenopoulos was not openly aiming at being a beneficiary of double-standards, at least his aim was to be treated royally, as a special case: an objective which is not much different from being inordinately favoured by the authorities.
Turning to transparency, nowhere could one imagine a more flagrant violation than the Christodoulou family banking school. Neither Mr Christodoulou, as governor of the Central Bank of Cyprus nor the two major banks, i.e. Bank of Cyprus and Marfin Laiki, which were behind the introduction of the School’s diploma under false pretences as a high standard banking qualification, had the courage to reveal the secret machinations underlying this odious anomaly.
Incredibly, this diploma of the American Bankers Association, with none of its courses recognised even in the US as a university course equivalent, were recognised by all commercial Cypriot banks as equivalent to a B.Sc.(Honours) degree in Management.
That no European Union country accords any academic recognition to this diploma is of no consideration to the Cypriot banking community.
The travesty and insult to internationally recognised educational standards, the de facto monopoly of the school and the hefty income secured for its shareholders, the clear signs of abuse of power, have not yet moved the authorities to action.
What description best fits the authorities, is an adaptation of Oedipus’ castigation of seer Tiresias, is that of them being “blind in their ears, in their brains, and their eyes (see: Oedipus Rex, Sophocles).” Do they not realise that inaction amounts to a cover-up, which is equally damnable as abuse of power itself?
Readers are reminded that the major shareholders of the School are the daughter and son-in-law of Mr Christodoulou, who without any prior experience in banking education, managed the school until Mr Christodoulou took over.
Some of the questions in need of answers are:
1) Is the school the product of the business acumen of Mr Christodoulou’s daughter, as he argues?
2) Have the banks voluntarily shouldered an unnecessarily costly initiative or have they acted under pressure from higher quarters?
3) What have the banks got in exchange for their transfer of revenue to the pockets of the Christodoulou family?
4) Since there are tangible costs to the banks from the support of the school and the salary upgrading of their employees who easily get the diploma, what are their tangible, quantifiable benefits?
5) Could the school have been established under any governor, other than Mr Christodoulou, and if so, would its shareholders and managers be the Christodoulou family or Mr Christodoulou himself?
6) The financial benefits to the family from the school, the managerial appointment of Mr Christodoulou’s son-in-law to Marfin Laiki, plus Mr Vgenopoulos’ lobbying President Papadoupoulos for a second term appointment of Mr Christodoulou as governor of the Central Bank, are all examples not of arm’s length relationship but of bed fellowship, given in exchange of what, of past or possible future reciprocity?
Admittedly many citizens paralysed in indifference by a climate of corruption which surrounds them go their way expecting others to “remove the chestnuts from a burning fire.”
The health and integrity of democracy most certainly is undermined by their indifference. When the erosion of democratic values is gradual and not easily identifiable except by concerned citizens and by the authorities as collective protectors of society, it is the government’s responsibility to step in and eradicate corruption. Abuse of power, as a form of corruption, cannot be fought without government involvement. .
In the subject covered herewith, the signs of corruption and abuse of power can be corroborated by investigations which cannot be undertaken by individuals. There are limits to what one citizen can do beyond bringing the anomalies to the attention of authorities. The baton is in the hands of the legal authorities and the government. It is up to them to understand their responsibilities and prove the worth of their agendas.
The people as always stand ready to blame or applaud them according to their actions, and not according to their superfluous political pomposity.
n Dr. Panayiotis C. Afxentiou is Professor Emeritus of Economics, University of Calgary (Canada)
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