The new Governor of the Central Bank of Cyprus (CBC) Constantinos Herodotou was sworn in on Tuesday. We hope that Herodotou will end the depressingly long tradition of bad appointments to the post of governor that started in 1982 and has lasted for 37 years. All presidents, after Makarios, were responsible for a making a poor choice during their term, including the current one, who took the unprecedented step of terminating the five-year contract of Panicos Demetriades after only two years and appointing Chrystalla Georghadji, who was singularly unsuitable for the post.
The longest-serving governor, Afxentis Afxentiou, was in the job for 20 years and it was during his time that Cyprus developed its international reputation as a money laundering centre, which was used to channel hundreds of millions of dollars out of Yugoslavia to buy weapons for the Milosevic regime in violation of UN sanctions; the governor turned a blind eye to this. He was succeeded by the corrupt and inadequate Christodoulos Christodoulou who has subsequently served a prison sentence for tax evasion and is currently facing charges of accepting a bribe from a Greek banker.
In 2007 the Papadopoulos government appointed the US-based academic Athanasios Orphanides, who also turned out to be a major disappointment failing to exercise adequate control over the banks. He allowed the island’s two systemic banks to gamble billions on Greek government bonds, which led to the collapse of the banking sector and the need for a bailout. Demetriades, his successor, was also an academic and had the thankless task of dealing with the meltdown of the banking sector, which made him an unpopular figure; that he acted like the punisher of the banks in order to help the Akel message about the economy’s woes did not help things. He eventually fell out with President Anastasiades and became the first governor to be sacked, probably unfairly.
Georghadji created no real problems as she was rarely seen or heard during her five years in the job. A governor in hiding that was clearly out of her depth, Georghadji was content to follow the guidelines of the ECB and implement the directives of the Commission, which is nowadays the role of a central bank governor in a eurozone country. Supervision of the banks and their compliance with anti-money laundering directives is the primary responsibility of a central bank nowadays as monetary policy and interest rates are decided by the ECB. A governor’s powers are limited.
A contribution to public debate about the economy from the CBC governor, however, would be welcome and hopefully Herodotou will not shy away from expressing an informed opinion when the need arises. He has the academic qualifications and the professional experience – he has actually worked in banking, which is a first for a CBC governor – to speak with some authority about the economy in sharp contrast to most of our politicians. We hope Herodotou will be the governor that will break the tradition of bad appointments.