As soon as the report on the collapse of the co-op bank was made public everyone united in calling for the immediate resignation of Finance Minister Harris Georgiades whose responsibility was deemed “severe” by the three-member investigative committee. Since that day the political/media chorus has been demanding he resign or President Anastasiades sack him. The president, instead, stood by his minister, issuing an announcement on Thursday evening saying that he had full confidence in him and recounting his achievements in the job during the difficult post-bailout period.
This caused even more anger among the critics, who were collectively outraged by the “lack of political sensitivity” by the minister and what they saw as the government’s refusal to accept the findings of the investigation. Obviously, the president did not want to lose a good minister with a good track record over an issue of political responsibility, especially when it was clear that Geaorgiades was in a lose-lose situation regarding the co-op bank from the word go. That he allowed an inept, under-qualified CEO with no real banking experience to run the state-owned bank was a very bad call but we are fooling ourselves in thinking that Nicholas Hadjiyiannis’ ineptitude was the main cause for the collapse.
The co-op bank was doomed to fail because the co-ops had been plundered and mismanaged for decades by incompetent and corrupt people that were untouchable because they had the backing of the political parties. It is no coincidence that the man in charge of supervising the co-ops, as head of the Co-operative Central Bank for close to 30 years, is now facing criminal charges for corruption. Since 2013 all the decisions taken with regard to the co-ops were political rather than economic, fully backed by the parties currently baying for Georgiades’ blood.
In 2013, the co-op organisation was bankrupt but it was saved because the government did not have the funds to cover insured deposits and because the existing deposits were too small to recapitalise it as had happened in the case of the Bank of Cyprus. The bank was bailed out by the taxpayer’s money but failed spectacularly to reduce its delinquent loans. Co-op customers did not have the habit of repaying their loans while the political parties made it even more difficult for any bank to tackle delinquent loans by making the foreclosures law toothless and protecting primary residences. How would the co-op bank reduce its delinquent loans most of which were housing loans if the legislature’s law prevented it from doing so? The primary residence protection was licence to borrowers not to repay their loans as repossession was ruled out.
Was this Georgiades’ fault? No, the entire political establishment is politically responsible for what the demise of the co-op bank which explains why they are all calling for Georgiades’ head. Once the minister is made the fall-guy the political parties, which have a large share of the responsibility for the demise of the co-op, can carry on pretending it had nothing to do with them.