Stung by the barrage of criticism directed at the government for its opposition to the proposed tax on the windfall profits of the banks, which failed to secure House approval, President Nikos Christodoulides undertook an initiative to counter the negative publicity. After all, two of the parties in the government alliance voted against the tax while the president himself publicly expressed his opposition, describing it as a “dangerous approach” and arguing that such a tax could have a negative effect on foreign investment.

Akel, which had proposed the bill and presented it as a ‘society v banks’ clash, went on the offensive lambasting the parties that voted against its bill as well as the government for siding with the greedy banks. It was a smart piece of political propaganda as nobody has the slightest bit of sympathy for the banks, which posted record profits in the first three quarters of the year, imposing the highest net interest rate margins in the eurozone, not to mention high charges.

In order to limit the bad publicity, the president called the CEOs of Hellenic Bank and Bank of Cyprus to the presidential palace on Monday in order to make proposals and suggestions to them about the interest rates and bank charges. The emphasis was on good bank customers and the ‘vulnerable’ members of society, said the government spokesman. The CEOs returned to the presidential palace on Wednesday, having evaluated the proposals and suggestions of the president for more discussions.

After Wednesday’s meeting, Finance Minister Makis Keravnos said that “many thousands” will benefit from the announcements the banks will make by the end of the week. They are to examine some of their charges, and “some charges are expected to be decreased and interest rates to be made more favourable for social categories and categories of the population such as good borrowers, pensioners, the young and particularly for those facing housing problems, for small businesses and for remote areas,” said Keravnos.

In other words, the banks will be carrying out social policy, through price discrimination, making banking cheaper for the elderly, pensioners, the young, but also for borrowers who are prompt with their repayments. Considering that most borrowers are currently prompt with their repayments, will they all benefit from lower charges? Will all small businesses, all pensioners and all the elderly be entitled to more favourable interest rates than the rest of us? If not, who will decide whether someone is eligible for favourable interest rates and lower bank charges? Will the banks base their pricing policies on income criteria?

There is something fundamentally wrong with the government telling the banks how they should charge their customers – we are not living in a command economy. This is just a publicity gimmick, the government feeling it needed to be seen to be doing something about the bank interest rates and charges, after opposing the tax on the windfall profits. And the two big banks are more than happy to play along and be part of this publicity exercise.

It will be very interesting to hear the announcements the banks will make to help the government defend itself against charges that it was siding with the banks rather than society.