March 11, 2014 11:43 pm

Cyprus appoints Georghadji to central bank

Cyprus has appointed the head of the state audit office as central bank governor following the resignation of Panicos Demetriades, who struggled to fend off criticism from Cypriot politicians over his handling of last year’s banking collapse.

Chrystalla Georghadji, auditor general for the past 16 years, will take over the post on April 11, the government said on Tuesday. President Nicos Anastasiades has informed Mario Draghi, president of the European Central Bank, of the decision, according to a government statement.


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An economist who trained at Athens university, Ms Georghadji also studied at Southampton in the UK before taking a master’s degree in Chicago. She worked at the Cyprus finance ministry and as supervisor of the insurance industry before joining the audit office.

Ms Georghadji is respected in Cyprus for taking a tough approach to mismanagement at state organisations and wasteful public spending.

Her appointment is expected to defuse tensions between Nicosia and the ECB, even though she does not have banking experience.

Mr Draghi warned Mr Anastasiades on several occasions last year against interfering with the independence of the central bank after the Cyprus president accused Mr Demetriades of failing to prevent the collapse of the two largest Cypriot banks, Laiki (Popular) Bank and Bank of Cyprus.

The crisis resulted in a €10bn international bailout of Cyprus along with a bail-in of uninsured Cypriot depositors and the eurozone’s first capital controls. Despite Mr Demetriades’ promises that all controls would be lifted within a few months, some restrictions are still in place a year later.

Mr Demetriades defended his record as governor in his resignation letter, published on Tuesday in Cypriot media, saying: “My actions were always aimed at ensuring confidence and stability in our financial system and I always acted in the best interests of our country.”

Costas Clerides, the Cypriot attorney-general, said on Monday that a criminal probe of forgery allegations against Mr Demetriades and other central bank officials over an €11m advisory contract to restructure the Cypriot banks had been dropped. Mr Demetriades and his central bank colleagues denied any wrongdoing.

Mr Clerides dismissed local media speculation that the president and central bank governor made a political deal to end the investigation, saying in a statement: “The decision was taken on purely legal grounds . . . It was not certain the case would stand up in court.”

Cyprus’s political opposition rounded on Mr Anastasiades over the resignation on Tuesday, accusing the government of paying an extra two years’ salary to Mr Demetriades in return for quitting.

“Instead of pursuing criminal charges against Mr Demetriades, he was rewarded with a bonus of €300,000 which was paid into a foreign bank,” the Democratic party said in a statement.

Mr Anastasiades denied any such agreement. “There was no deal . . . but an understanding that for the national good to prevail some difficult decisions are required,” he said. Mr Demetriades “judged that a year after [the crisis] and with the banking system stabilised, he could now submit his resignation. He did it, I thank him for the decision and for his excellent co-operation.”

Mr Demetriades could not be reached for comment.

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