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Our View: CBC Governor has shown he cannot be trusted to take the right decisions.

THE PRESIDENT of the European Central Bank Mario Draghi was quick to come to the defence of Cyprus' Central Bank Governor Panicos Demetriades. In a letter sent to President Nicos Anastasiades, Draghi warned that the Governor could only be dismissed on the grounds specified by EU law and even then the action would have to be reviewed by the EU's court of justice.

Anastasiades responded with a six-page letter, denying that any proceedings for the sacking of Demetriades had been undertaken but also listing some of the dubious policies implemented by him since he was appointed by the Christofias government last May. Demetriades' has been responsible for many ill-conceived decisions that caused harm to the country, but his decision to carry on providing emergency liquidity assistance to the insolvent Laiki Bank was catastrophic and could be described as criminally negligent.

Should a Governor whose appallingly poor judgment has cost us billions, be kept in his position to cause more harm to the country because he has the support of the ECB president? And was Draghi not concerned that Cyprus has a Governor who was taking billions of ELA for an insolvent bank, without receiving adequate security from it, building up a debt in excess of e1/49.2 billion? Obviously not, as the ECB has arbitrarily passed on this debt to the Bank of Cyprus and demanded additional collateral from it to cover Demetriades' blunders. We would have thought the ECB would have wanted him out, instead of standing by him and issuing warnings to the government.

Demetriades has also tried to turn opinion abroad against the government telling Bloomberg that the Governor's independence was under attack. He told the news agency that there had been "constant interference in relation to the management of the banks under resolution," which was a bit rich, considering how Demetriades had obeyed all the diktats of Christofias government without ever complaining that the Governor's independence was being undermined. He publicly admitted that he carried on sanctioning ELA for Laiki because the previous government wanted any decision on the bank to wait until after the elections.

The Anastasiades government has been absolutely right to interfere for the very simple reason that the Governor has shown he cannot be trusted to take decisions that are in the best interest of the country. Was it not Demetriades who wanted to re-open the banks on the Tuesday after the first Eurogroup meeting? If the government had not prevented him from doing so there would have been a bank run that would have made things even worse.

Of course it should be said that he was merely following the instructions of the ECB, which, as Demetriades pointed out a couple of weeks ago, has full confidence in the Governor. President Anastasiades has every right to have no trust or confidence in a man who acts as the ECB's loyal agent, because as events have shown the last thing the ECB is interested in is the good of the Cyprus economy.

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Publication:Cyprus Mail (Cyprus)
Geographic Code:4EXCY
Date:Apr 17, 2013
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