Orphanides comes out guns blazing

FORMER Central Bank governor Athanasios Orphanides yesterday accused President Demetris Christofias and ruling AKEL of waging a “merciless communications war” against the island’s banking system, which has ultimately hurt the economy and the country.

In an open letter to Christofias, Orphanides accused him of doing nothing to shield the banking system when he could and wondered if there was any purpose in trying to inflict further damage on the banks.

“Whose interests exactly are served?” Orphanides said. “Certainly not the interests of Cyprus.”

Orphanides said the claim that Cyprus is more or less sinking because of the banks “is misleading and harms the economy and the country. Equally misleading is the position that the regulatory framework implemented by the Central Bank for many years was inadequate and that I personally bear the responsibility for the ‘bad’ state in which ‘the banks’ find themselves.”

The former CB boss blamed the government for the ills of the economy, which he said was put on life-support long before the October 26, 2011 decision to write-off a significant chunk of Greek debt.

“By delaying the adoption of corrective measures, suggested by our European partners, the only thing you achieved was the further deterioration of the economy and the rise of unemployment to unprecedented levels,” Orphanides said.

He also questioned why Christofias had done nothing to protect the banking sector when European leaders decided to write-off 76 per cent of Greek debt.

“You personally Mr. Demetris Christofias, as the leader of our state, had a right, reason, and obligation to defend your country when the decision for a haircut was taken in Brussels,” Orphanides said. “You chose not to. I cannot know the reasons. But I know that if you considered the millions in losses for the banking system a necessary evil, you could have asked for offsetting measures at the same time. But you also failed to do this. Why Mr. President?”

The Popular Bank suffered a €2.5 billion loss as a result of the haircut and now needs a state bailout to the tune of up to €1.8 billion.

The cash-strapped state in turn will itself be forced to resort to either bilateral lending or an EU bailout to raise the cash.

Asked earlier this month about his failure to do anything, the president said: “I cannot imagine what would have happened if I said Cyprus is against (the haircut). Therefore, I naturally gave my vote too, irrespective of whether I saw the dangers for us.”

Orphanides had told parliament on April 30, the last day of his term that he was rarely consulted by Christofias.

He said he favoured an independent investigation into the banking system and took a shot at Christofias over last year’s naval base munitions blast that killed 13 sailors and fire fighters and knocked out the island’s biggest power station.

“It has been proven in Cyprus, through the tragic incident at Mari, that outstanding and objective investigations can be undertaken,” Orphanides said.

An independent inquiry found Christofias mainly responsible for the July 11 catastrophe and also blamed the foreign and defence ministers.

Christofias rejected the findings, saying they had not been substantiated. He also accused the investigator Polys Polyviou of overstepping his mandate.

The findings of the inquiry are not binding.

The government responded to Orphanides with a five-line statement later yesterday saying Orphanides had not exercised his duties properly, causing billions in damages to Cyprus and its economy.

“We hope that at some stage Mr Orphanides will realise the negative consequences of his administration. The government will not deal with any new statements from Mr Orphanides.”