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Our View: The Co-op show unlikely to reveal anyone to blame

Cooperative Central Bank CCB

It’s show-time folks. These should be the first words spoken every time the authorities announce there will be an investigation into something that went badly wrong, so that the guilty will be brought before justice, as the political parties like to say. Almost all these investigations result in reports of hundreds of pages that nobody reads and that rarely find anybody criminally responsible for anything.

This is because the primary purpose of an investigation is to reduce public criticism of politicians by creating the impression they are also angry by what happened and supposedly want those responsible punished. In most cases, the politicians know that it would be impossible to identify criminal responsibility, but that is not the objective. The legislature, for instance, undertook two major investigations, one after the stock market bubble burst in 2000 and another after the 2013 meltdown, but neither found guilty parties nor brought anyone before justice.

There were another two investigations into the banking collapse of five years ago. One ordered by the president and conducted by a retired judge, with limited knowledge of banking and economics, turned out to be more like a show for the public with dozens of people called in to give their testimony that was included in a report that shed little light on what had actually happened. Tens of millions of euro have been spent on the Attorney-general’s criminal investigation which lasted years and resulted in one man being put behind bars while half a dozen other defendants were acquitted.

Former CEO of the Bank of Cyprus Andreas Eliades received a prison sentence for making misleading statements about the bank’s capital needs during an AGM, which was not the cause of the economic collapse. Several Laiki Bank executives and board members are also currently on trial, facing a variety of charges even though everybody knows that it was the decisions of the late Andreas Vgenopoulos that was the main cause for the bank’s collapse.

It was show time again this week after the dissolution of the Cooperative Central Bank and the transfer of its deposits as well as €10.3bn of its assets to Hellenic Bank. All the parties demanded an investigation to establish why the bank was sold off and the how the government managed to squander close to €5bn in its unsuccessful efforts to keep it afloat. The deal between the government and Hellenic also included a guarantee to the buyers from the state for any potential losses that were not expected to exceed €184m in a 12-year period.

The show was more entertaining than usual with politicians publicly bickering over which period of the co-op’s operations should be investigated and who would be doing the investigating. Akel chief Andros Kyprianou wanted the period the CCB was under state ownership investigated so the government would carry the can and wrote to the attorney-general Costas Clerides requesting a probe into the sale agreement to Hellenic Bank as well as the way it was administrated. The government meanwhile wanted an investigation into the causes that led to the collapse of co-ops and their need to be bailed out by the state in 2013. The president, according to government sources, was considering hiring international experts to carry out the investigation to safeguard its objectivity and impartiality.

Does President Anastasiades not trust the impartiality and objectivity of the attorney-general, who had the constitutional authority to carry out an investigation? The suggestion was part of the show, to illustrate the president’s alleged commitment to a thorough investigation. Clerides, after making it clear he knew his job and did not need promptings from anyone about launching an investigation, said he would appoint an investigative committee and deploy the assistance of experts. We can look forward to another long-drawn out and costly investigation that will most probably fail to identify those to blame because the whole party establishment was responsible for the eventual collapse of the CCB.

For the last five decades the co-op credit banks were run – mismanaged would be a more accurate term – by the political parties and their placemen who turned them into agencies for dispensing favours to voters. For decades they issued loans to people that could not repay them, never took action against debt defaulters and routinely overestimated the security provided for loans. This was what our political parties praised as ‘banking with a human face’ and they unanimously rejected suggestions from the EU that the co-ops should be placed under the supervision of the Central Bank. They would lose their human face if that happened so the ‘supervision’ was left to co-op managers who are currently facing charges of corruption and fraud.

The co-ops were agencies of party-sponsored corruption and incompetence, the collapse of which was inevitable even after they were merged into the CCB with an injection of €1.7bn from the taxpayer. It was also extremely naïve to think state ownership could turn it around, given the state’s abysmal record as a business manager; its business decisions are always based on political rather than economic considerations and we saw it again in the case of the CCB.

All our politicians are now clamouring for an investigation in the hope it will deal with technicalities and not highlight the guilt of the parties and successive governments which not only tolerated, but encouraged the endemic corruption in the co-ops that was guaranteed to result in bankruptcy.

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