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Cyprus Economy

Cyprus finance minister quits, cabinet reshuffle on Monday

16 March, 2012

 * ECB's Orphanides loses ally; Government denies rift * 

Cyprus finance minister Kikis Kazamias resigned for health reasons on Friday, just eight months after he was appointed in the previous cabinet reshuffle.
The announcement means Central Bank Governor and ECB Governing Council member Athanasios Orphanides has lost a key ally in the Cypriot government that has continuously undermined him and is now unlikely to be reappointed next month.
A government spokesman said President Demetris Christofias will announce a limited cabinet reshuffle on Monday, March 19, but denied reports that Kazamias was resigning because of disagreements with the president.
Newspapers reported Kazamias was bowing out partly because of his health, but also because of the president's refusal to re-appoint Orphanides at the helm of the central bank for another five years when his term ends on April 30. Several names have been touted for the post, with the government leaning towards Panicos Demetriades, a professor of financial economics at the University of Leicester and considered by some as a euro-skeptic.
Vassos Sharly, a former deputy CEO at Bank of Cyprus or Phidias Pelides, the former CEO of audit firm PwC and current Chamber of Commerce president are reported to be in the loop as replacements at the finance ministry.
A member and former MP of the ruling communist AKEL party, Kazamias was appointed in August 2011, when Cyprus was on the brink of an economic meltdown after a munitions disaster prompted the collapse of the governing coalition.
He helped mend frayed relations of the government with Orphanides, whom some government officials blame for the heavy exposure of Cypriot banks to Greek debt.
The exposure is cited as a key factor in repeated ratings downgrades, and now two of the world's three ratings agencies class Cypriot sovereign debt as junk.
Central Bank sources say Orphanides had warned banks about their exposure to high-yielding sovereign debt on several occasions, but had been ignored by government officials.
Another candidate for the finance ministry would have been current Trade Minister Praxoulla Antoniadou, but a news site suggested she would be sidelined in a reshuffle because of the way she handled the recent discovery and management of the island’s offshore natural gas resources.
In such a case, Interior Minister Neoclis Sylikiotis would probably move to the Ministry of Commerce and Industry, while his post could be taken over by former Nicosia Mayor Eleni Mavrou who failed to get re-elected last December.