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30th Sep 2023

Cyprus central bank governor resigns

  • Nicosia was rocked by scandals surrounding the Central Bank and its contracts with an American consultancy (Photo: Kyriakos)

The governor of the Cypriot central bank, Panicos Demetriades, on Monday (10 March) resigned after being investigated over a secret deal he negotiated with an American consultancy firm in connection with his country's €10bn bailout.

Demetriades handed in his resignation to the Cypriot finance minister while in Brussels, where eurozone finance ministers were meeting on Monday.

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Quoting a source who saw the letter, Reuters said Demetriades cited “family and personal” reasons for his departure, and “difficulty in cooperating with the board of directors” of the Central Bank.

The board last year issued an internal report seen by EUobserver examining the circumstances in which Demetriades had agreed to a secret fee for Alvarez&Marsal, the consultancy hired by the Central Bank to evaluate the gap needed to be filled in the Cypriot banking sector.

The audit claimed Demetriades kept the board in the dark about the secret fee, which would have included a cut from the seized deposits that were part of the bailout deal. Demetriades said he had to agree to the fee, because he was threatened by Alvarez&Marsal they would leave Cyprus at the height of the bailout negotiations.

According to the Cyprus Mail newspaper, the prosecutor's office in Cyprus has dropped the charges in the Alvarez&Marsal affair, but stressed this had nothing to do with his resignation.

Demetriades will receive a severance pay of €250,000, the same paper reports. Demetriades was under pressure to resign already last year when the scandal about the payment broke. He allegedly asked for €1 million in severance pay.

Demetriades was in his post for two years, after being appointed by the previous - left-wing - administration. He had publicly fallen out with the current Conservative President, Nicos Anastasiades.

The row between the two raised concerns in the European Central Bank, which stressed the importance of national central banks being independent from their governments.

The ECB "took note" of Demetriades' resignation and said he "played an important role in the implementation of the adjustment programme.”

“We count on a fruitful cooperation with his successor,” an ECB spokesperson said on Monday.

Meanwhile, eurozone finance ministers said Cyprus was "on track" in its reforms and could receive the next tranche of bailout loans, amounting to €150 million.

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