Cyprus Mail

‘No rift with the Central Bank’

Central Bank Governor Chrystalla Georghadji

By Angelos Anastasiou

THE political storm caused by damaging revelations surrounding the Central Bank governor’s contract, President Nicos Anastasiades outburst in calling her a liar and subsequent fears of political instability as parties bayed for blood, forced the government into damage-control mode yesterday, insisting there was no rift.

At issue is the fact that Governor Chrystalla Georghadji’s daughter is employed at her former husband’s law firm, which represents ex-Laiki Bank’s strongman Andreas Vgenopoulos, indicating a possible conflict of interest. But the relevant clause in her contract had been altered to sideline standard accountability procedures. It was also revealed that she had inserted another clause the contract that would guarantee her a €10,000 a year pay rise.

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Government Spokesman Nicos Christodoulides

Yesterday, government spokesman Nicos Christodoulides said the impression of a rift between the government and the Central Bank was false. “It is unfortunate that in the last few days an impression of a conflict between the government and the governor of the Central Bank is being promoted,” he said.

“The President’s statement of October 31 was clear, and regarded the terms of the Central Bank governor’s contract, as well as issues of good government which need to be respected and upheld by all government officials,” he added but said the government fully respected the independence of the Central Bank.

Finance Minister Harris Georgiades was also supportive of Georghadji’s performance and tried to downplay the contract issue. “I don’t want to suggest that [this issue] might affect the goal of economic recovery – let us not exaggerate – but it is certainly not a positive development,” he told public radio CyBC yesterday.

“We have had an extremely positive and effective cooperation with Georghadji since her appointment. I dare say that for the first time, when I called the Central Bank the person on the other end of the line shared my views, goals and attitudes in terms of the way forward for our banking system. So I think it’s very important that this institutional cooperation remains undisturbed.”

Georgiades acknowledged the seriousness of the issue, but sought to address calls in favour of ousting Georghadji. “A peripheral issue has arisen, and I don’t underestimate its importance, but I would remind that the post of governor is independent – the governor is not subordinate to the finance minister or the President, and cannot be questioned or directed,” he pointed out.

Georgiades and Georghadji had a brief meeting at the finance ministry around noon yesterday, after which neither offered comment. Georghadji had also been due to attend a meeting at the Attorney-general’s office with investigators in the ongoing probe into the economy’s near collapse. The meeting went ahead with the legal services and police investigators.

The House Watchdog committee said yesterday it would resume discussion around Georghadji’s contract, chairman Fidias Sarikas said yesterday . “What is certain is that the committee will continue discussion as it was not concluded in [last] Friday’s session,” he said.

“We will need to focus on who was responsible for drafting and amending the contract. Therefore, in addition to Georghadji and the Attorney-general, we will also invite to the session the presidential aide responsible for drafting the contract,” he said.

But the moderate language from the government did little to assuage the barrage of calls by political parties yesterday for Georghadji’s resignation.

AKEL deputy Aristos Damianou said the latest developments left Georghadji no choice but to “make her decisions,” while calling for a probe into the issue of her contract.

“As Auditor-general, Mrs Georghadji routinely positioned herself boldly and publicly on anything she perceived as done wrongly in Cyprus, and must act accordingly today,” he said. “She is of course expected to make her decisions in a wider sense.”

Central Bank Governor Chrystalla Georghadji
Central Bank Governor Chrystalla Georghadji

Nicholas Papadopoulos
Nicholas Papadopoulos
DIKO leader Nicolas Papadopoulos insisted on her resignation. “DIKO said right from the start that President Anastasiades’ statement leaves Mrs Georghadji no option but to resign, as she has lost the confidence of the man who appointed her,” he said.

But ruling DISY’s leader Averof Neophytou, after a laconic two-sentence statement calling for Georghadji’s resignation on Friday, tried to reel it in, perhaps signalling the government’s second thoughts on addressing the governor’s offence.

At a news conference yesterday, Neophytou said the Central Bank should break free from the one-man institution it has traditionally been, and that its decision-making structures should be re-organised. Asked whether his party insisted on Friday’s resignation call, he merely said that “repeating the same issues is not helpful.”

Despite political furore and calls for her resignation by political parties, sources close to Georghadji said she had no intention of resigning her post.

During a tumultuous House Watchdog committee session last Friday, Georghadji was called upon to respond to the claims that her daughter is employed at her former husband’s law firm, which represents ex-Laiki Bank’s strongman Andreas Vgenopoulos.

Vgenopoulos is currently in a legal battle with legacy Laiki Bank, which answers to the Bank Resolution Authority – headed by Georghadji in her capacity as governor of the Central Bank.

It was this potential conflict of interest, along with a clause found in her predecessor’s contract – but missing from hers – disallowing first-degree relatives from being employed by any business connected with the Central Bank, that sparked heated debate at the House, leading to Georghadji’s irate departure from the committee session.

But she had already claimed she had met with Anastasiades personally over press reports of the conflict several weeks earlier, and that he told her that he “knew where these attacks are coming from.”

It wasn’t long before Anastasiades issued a stunningly undiplomatic statement, essentially accusing Georghadji of having lied about their personal conversation, of having altered the contract she had been offered in April 2014 before signing it but failing to inform the government, and of trying to hide behind his name in the face of criticism against her.

“I want to repeat that my position of zero tolerance on issues that could be deemed, or even perceived, as a violation of good government rules by anyone also applies to Mrs Chrystalla Georghadji,” he said.

The issue of the potential conflict of interest had been reported in September by daily Kathimerini, prompting an official statement from Georghadji, in which claimed that she had no connection to her former husband’s law firm and that her personal integrity has been well-documented through 15 years of service as Auditor-general – a weak defence, by any standard. At the time, neither Anastasiades nor any government official had offered comment.

In contrast, during Friday’s committee session Georghadji acknowledged the potential conflict and tried to extricate herself from political outcry by informing deputies that she exempted herself from any session of the Resolution Authority that discussed the Vgenopoulos case, but that only got her into deeper trouble as deputies wondered whether the law allows the Authority’s head to cherry-pick sessions to attend, and questioned the validity of decisions made in the absence of the Authority’s chair.

In addition to her failure to disclose the potential conflict, Georghadji has also received flak for reworking the contract she was handed to sign, which she said she did on advice from the Central Bank’s legal advisors. Along with removing the “first-degree relatives” clause, reports suggest she had inserted a clause that aligned her salary with the “general pay increases given to the Bank’s permanent staff from 2007 to 2013,” translating to a salary increase of €50,000 over five years, or €10,000 annually.

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