PRESIDENT Anastasiades’ public dressing down of the Governor of the Central Bank and his threat to try to build a legal case against him may have been seen as an impulsive outburst, but it was not. These were not views expressed in anger, but had been thought about beforehand and delivered as a short speech, with his arguments leading to the conclusion that he was obliged to explore the possibility of removing him from his post.
The president had even found out how he could lawfully terminate the contract of the Governor. The constitution gave him the power to apply to the supreme legal council consisting of all Supreme Court judges, on the grounds that the Governor was performing his duties inadequately. Of course, the president would have to prove his case before the council to achieve the desired result, which is not guaranteed.
The only question that is difficult to answer was why Anastasiades chose to make his plans public? He could not have gained any advantage from doing so, especially as he admitted that he was still looking for documentation that would allow him to refer the Governor to the council. What if the concrete evidence that would make a strong case is not found and the president decides against applying to the supreme council? Such a development would reflect badly on him.
There is no doubt that Panicos Demetriades has been performing his duties inadequately. From the day he was appointed, he appeared to be on a mission to destroy the banking sector, constantly undermining it in public, encouraging the inflation of banks’ capital needs, following instructions from AKEL and taking catastrophic decisions such as the building up of Laiki’s ELA debt and arranging the fire-sale of the banks’ Greek branches. This list is very long, but how much of this would stand up in court, especially if Demetriades decides to pass the responsibility for his decisions to the ECB or the troika?
The president may have chosen to follow the procedures envisaged by the constitution for sacking the Governor, but this does not seem the best approach. First, the legal proceedings could take a very long time to be concluded, during which time Demetriades would continue to perform his duties inadequately to the detriment of the banking sector; second, the legal battle would prolong instability and the uncertainty over the future of the Bank of Cyprus; third, the ECB may express disapproval and apply pressure on the president not to take action; fourth, the state may lose the case.
A more pragmatic approach would have been for Anastasiades to try to negotiate a compensation package in exchange for Demetriades’ resignation. The state could have paid off his contract and he would have stepped down ‘for family reasons’. There would have been objections to paying him three-and-a-half years’ worth of salaries, but this would have been the speediest and least costly way of getting rid of Demetriades.
Some €500,000 in compensation may be completely undeserved, but it is nothing when it is compared to the cost of the incalculable harm he could do to the economy by staying in his post until legal proceedings are completed, assuming they ever begin.