Scent of a woman at the wheel of the Cyprus Central Bank

Chrystalla Georghadji

The government of the Republic of Cyprus announced on 11 March 2014 that following the resignation of the current governor of the Central Bank of Cyprus, Panicos Demetriades, the post will be assumed for the first time ever by a woman, namely the current auditor-general of the country, Chrystalla Georghadji. She will take office on 11 April 2014 after Demetriades works out his one month notice period as stipulated by his contract.

Binaryoptionswire reports on this story for two reasons. The first is the importance of Cyprus as a jurisdiction for forex and binary options brokers, which means that developments in the country’s economy and financial regulating authorities do have indirect repercussions on the wider industry. Moreover, as Cyprus is part of the Eurozone, its Central Bank Governor is by default a member of the governing board of the European Central Bank and this also bears its own significance. In fact, and although the outgoing governor had been at odds with President Anastasiades and his government for a year,  both the European Central Bank and the European Commission had repeatedly warned that removing a sitting eurozone central bank chief would violate treaty rules and could bring a court challenge. Furthermore, according to the official statement issued by the government the President of Cyprus has already informed the European Central Bank chief Mario Draghi of his decision to appoint Georghadji and appears to have gained his consent.

The second reason for reporting on this story it is simply because it is interesting and intriguing, involving a lot of people and behind the scenes rumblings. To begin with, the new Cyprus Central Bank governor (or perhaps governess?) is well respected and appears able to carry out the workload and significant responsibilities that her new position entails. Currently at the age of 58, she has been a successful career technocrat and had held the position of the auditor-general since 1998. The auditor –general is essentially the anti-corruption watchdog, whose tasks entail the production of an annual report highlighting the misuse of public funds and lapses in public administration. During her tenure, these reports were particularly hard-hitting and had often pested several governments. Her appointment is expected to facilitate the cooperation between the government and the Central Bank, since the relations of her predecessor with the President and his government were tense to say the least, with the Governor being in acrimony with the administration since the bailout/bailin of the Cyprus’ economy last year.

Although the official reasons cited by Panicos Demetriades for cutting short his tenure by three years, were mainly “personal and family reasons”, very few people actually take this at face value. Indeed, despite some warm words in an official announcement thanking Demetriades for his efforts in saving the country from bankruptcy, everybody is almost certain that he is not likely to be missed, since the criticism against him had been almost uniform, from the press, the majority of the political parties as well as the government. Indeed, even the board of directors of the Cyprus Central Bank was against him, with one member suing him for libel and the rest accusing him of fraud.

The daunting task of “getting rid” of the governor of the Central Bank occupied the mind of the government for months and because he was protected by the European rules governing the independence of Central banks, the administration tried to induce his resignation through an amalgamation of pressure, threats and the promise of an attractive and lucrative severance package. Although he himself denies any wrong doing, Demetriades was the subject of a probe by the country’s Attorney General. The fact that this probe was dropped simultaneously with the announcement of Demetriades’ resignation , coupled with the rumours that he also received more than 300.000 euros in the form of a bonus/compensation which, in breach of capital controls, were deposited by the government in this bank account in London, has caused an uproar and severe reactions both from the political parties and the public opinion in Cyprus. It remains to be seen how this story will unfold and will draw your attention to it, if the need arises.