* Christofias unleashes fresh attack on Central Bank Governor *
Cyprus President Demetris Christofias unleashed a fresh attack on Central Bank Governor Athanassios Orphanides, blaming him for not controlling the Cypriot banks that invested heavily in Greece which subsequently caused rating agencies to downgrade the island’s sovereign credit ratings.
The president, his Akel party General Secretary and the government spokesman have increased their attacks on Orphanides in recent months, primarily over the Governor’s comments about the problems facing the economy and how these should be remedied.
“I was happy to hear from Orphanides that we are all responsible. So, he too is responsible,” Christofias said.
He accused the central banker of “taking every opportunity” to make comments to the press, but that although Orphanides is independent, he should be subject to some principles.
“I respect him as a person and his office and demand equal respect back,” he said.
“Of course it was the responsibility of the Governor who did not force the (Cypriot) banks to release funds in Cyprus, but instead they took their funds overseas,” Christofias said while answering media questions about the recent Standards & Poor’s downgrade and the potential negligence of the Central Bank.
The press briefing to mark his three years in office was dominated by the economy and rating downgrades, while the president also blamed the opposition parties and said the media did not project his administration’s work. He was particularly defensive of Labour Minister Soteroulla Charalambous’ efforts to curb unemployment, currently at a record 7.2%, and Interior Minister Neoklis Sylikiotis, who has taken the brunt of criticism over increased number of migrant workers and asylum seekers.
“Although the rate of unemployment in the EU is falling, the EU-average is still much higher than the rate in Cyprus,” Christofias said.
"NO PLAN"
The main opposition party, Disy, was quick to respond with press spokesman Haris Georgiades issuing a statement that “this government has no plan in place on how to tackle the crisis.”
“The economic and social policy has been exhausted by transferring blame to all others – the Central Bank Governor, the political parties, the media, even the previous administrations, even though Akel was a partner in these.”
“Unfortunately, after three years the lack of vision is clear. The President has nothing to say about the future of this place, about the prospects of the Cyprus society, about the future of the youth. He didn’t even answer the basic question if the personal financial situation of each Cypriot is better today or worse ever since he came into office,” the statement concluded.
In his criticism leveled at Orphanides, the president said that the central banker regulates only the banking sector “and cannot check the government.”
According to Christofias, the rating agencies said that the only reason for the downgrades “was due to the Cyprus bank’s exposure to Greece. No other reason.”
“We have been asking to cut interest rates to allow households and small to medium-sized businesses to get cheap loans. Even the European Central Bank has lowered its rate to 1%, while here we charge 6-7%. The Governor should have forced a rate cut,” he concluded.
Orphanides said on Monday that delays in tackling long-overdue reforms has cast doubts on the outlook of the economy from international markets and that swift action was needed by authorities to improve public finances.
GOVERNMENT SUPPORT
Though government officials tend to focus on the S&P downgrade being the result of Greek exposure, central bank officials perceive it as an effect of a weaker domestic economy, and the potential inability of the government coming to the aid of banks, if required.
Orphanides has repeatedly said in the past that Cyprus needs to cut down on spending, citing its high public payroll, and launch pension reform.
S&P estimated the domestic system's total exposure to Greece at about 1.7 times the island's GDP.
Orphanides said Cyprus's two largest banks, Bank of Cyprus and Marfin Popular had taken steps to increase their capital. On its part, he said, the Central Bank had, as early as 2007, curbed bank credit expansion in the mortgage market – a step which he said had triggered criticism from some quarters that it was depriving the state of revenue.
He said the Central Bank was also in the process of drafting regulations for the creation of a bank stability fund. He has said he envisages it to be worth 500 mln euros, initially.
"I believe we managed to avert many of the ills which we have seen in other countries," Orphanides said. "We are not however responsible for economic policy, and it is here that we have some concerns on the delays which exist on taking decisions which could help our country."
