Cyprus Mail
Cyprus

Rehn joins IMF in slap on wrist over CBC row

European Commissioner Olie Rehn

By Stefanos Evripidou 

THE EUROPEAN Commission has joined the International Monetary Fund (IMF) in expressing consternation at the government’s very public threat to dismiss Central Bank governor Panicos Demetriades, according to reports.

Politis reported yesterday that European Economic and Monetary Commissioner Olli Rehn sent a letter to Finance Minister Harris Georgiades highlighting the need to preserve the independence of the Central Bank of Cyprus (CBC) and its governor following the president’s public dressing down of Demetriades.

Last week, President Nicos Anastasiades said during an interview with Mega TV that he was collecting information listing Demetriades’ inadequacies as governor, which he would consider taking to the Supreme Court of Judicature to initiate proceedings for his dismissal.

The comment was made on the eve of the president’s departure for New York to participate in the 68th UN General Assembly, and served to intensify the ongoing tug-of-war between Anastasiades and Demetriades over developments at the Bank of Cyprus (BoC).

The threat of dismissal prompted IMF spokesman Gerry Rice to say: “We believe that full cooperation between the executive branch and the central bank in Cyprus is key to ensure financial stability.”

He added, perhaps as a reminder to the warring parties, that the next IMF mission to Cyprus would be next month for the second review of the bailout programme.

Asked in New York to comment on the IMF statement, Anastasiades limited his response to stating that he fully respects the Constitution of Cyprus “as well as all rules and regulations of the Eurosystem and especially of the European Central Bank”.

Yesterday’s Politis cited multiple sources saying that the latest letter sent by EU Commissioner Rehn makes special reference to Article 130 of the Treaty on the Functioning of the EU which preserves the independence of the national central banks and the European Central Bank (ECB).

According to Article 130 of the EU Treaty, when exercising powers and carrying out tasks and duties conferred upon them by the EU Treaties, “neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body”.

The article further notes that EU institutions and national governments “undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks”.

In other words, Rehn is joining the IMF in politely taking the government to task over its very public threat of dismissal and reportedly urging the government to avoid actions that may threaten the independence of the supervisory authority and the governor.

When asked about the letter by Politis, the Cypriot finance minister refrained from comment, saying it would not be wise to comment on personal correspondence with EU commissioners.

“I would agree though with the public statement of the IMF spokesman that there needs to be the requisite cooperation between the executive and Central Bank to ensure financial stability,” he said.

The president’s actions are driven by that need and with respect above all to the Constitution and the treaties governing the functioning of the EU, he added.

Invited to comment yesterday, DISY MP Prodromos Prodromou said it goes without saying that the decisions taken will be for the better functioning of the central bank within the eurozone.

“The article in the EU Treaty is clear and provides that there should be no political interference in the independence of the central banks of member states.

“In Cyprus, there will be no such interference. What the president is going to decide and do we will learn on his return following his very crucial contacts in the US.”

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