Cyprus president admonishes central bank chief

Cyprus president tells central bank chief not to catch government by surprise with actions

Associated Press
Cyprus president admonishes central bank chief
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Women take photos of each other outside a closed shop with a sign reading in Greek " For rent" at a main shopping street in central capital Nicosia, Sunday, April 14, 2013. Cyprus' President Nicos Anastasiades has chided the central bank chief to not act in ways that "catch the government by surprise," but to move to stabilize the country's troubled banking sector. (AP Photo/Petros Karadjias)

NICOSIA, Cyprus (AP) -- Cyprus' president on Sunday chided the central bank chief to not act in ways that catch the government by surprise, but to move to stabilize the bailed-out country's troubled banking sector.

President Nicos Anastasiades' didn't say what Central Bank Governor Panicos Demetriades did to raise his ire. But he suggested Demetriades' actions led to Friday's resignations of three Central Bank Board members.

Demetriades, an appointee of the previous left-wing administration, told the Sunday edition of Phileleftheros that his cooperation with the government and parliament is a given in order to deal with the country's severe financial crisis, but that the central bank's independence must be respected.

He also said in the Phileleftheros interview that he and his family have received death threats "for months" but didn't elaborate, citing security reasons.

Lawmakers have criticized Demetriades over his role in talks with the country's eurozone partners and the International Monetary Fund that culminated in a 23 billion euro ($30 billion) rescue package.

Under the bailout's terms, Cyprus has to raise 13 billion of the overall amount by imposing losses on deposits over 100,000 euros in the country's two largest banks — Bank of Cyprus and Laiki.

Laiki, which took heavier losses from bad Greek debt and loans than the larger Bank of Cyprus, will be broken up in to a "good" bank which will be folded into the bigger lender and a "bad" bank which will be wound down.

As part of its bank restructuring, and to prevent a run on the country's banks, Cypriot authorities have imposed a series of capital controls — the first that any country has applied in the eurozone's 14-year history — including a daily 300 euro withdrawal limit.

Officials said the restrictions would be lifted gradually until trust in banks is restored. On Sunday, authorities further loosened controls by raising the monthly domestic bank-to-bank transfer limit for individuals from 10,000 t0 50,000. For businesses, the transfer limit has been raised from 50,000 to 300,000 euros, but documents justifying the transfer must be presented. Money transfers to banks outside Cyprus of up to 2,000 euros monthly per person and business have also been permitted, as have domestic cashless payments of up to 300,000 euros per person or business per month.

Cyprus' economy is projected to shrink by 13 percent of gross domestic product over the next two years.

Parliament's Ethics Committee is now looking at whether Demetriades should be investigated for allegedly failing to provide lawmakers with all information regarding an independent probe into how Bank of Cyprus and Laiki got into trouble.

Parliament has no authority to remove Demetriades from his post. However, Anastasiades last week rescinded the previous administration's appointment of Central Bank Deputy Governor Spyros Stavrinakis, a close associate of Demetriades.

The developments prompted a letter by European Central Bank Governor Mario Draghi that was leaked to local media warning that any bid to push Demetriades out would contravene European laws.

Anastasiades denied any such move was afoot, saying Draghi had been "misinformed" about the intentions of the government "which fully respects the central bank's independence."

But Anastasiades said that although he was saddened by the way the situation has unfolded, he would dispatch his own letter to Draghi giving his version of events.

"Mr. Draghi will be informed about some incidents which I hope will be taken to heart that had there been the proper supervision by European institutions, we wouldn't be in the position we're now in," Anastasiades said.

In a written statement, government spokesman Christos Stylianides dampens down the matter, saying what's needed now is the "utmost unity" despite "disagreements on a philosophic and pragmatic level."

Meanwhile, Anastasiades told Russian businessmen Sunday that his government will amend existing laws to grant citizenship to non-resident depositors who lost 3 million euros from their Cypriot bank accounts as a result of the bailout.

An estimated 20 billion out of the overall 68 billion euros held in Cypriot banks accounts at the end of January were believed to belong to Russians.

Anastasiades told a Russian business conference being held at the coastal resort of Limassol that he would reduce the minimum amount that a foreign national would need to invest in Cyprus in order to make them eligible for Cypriot citizenship from 10 million to 3 million euros.

The Cypriot president also said he would also drop a condition requiring citizenship applicants to keep 15 million euros in Cypriot banks for a fixed five-year term, saying that the amended law would allow immediate access to that money.

"We believe that a number of measures to be adopted could on the one hand mitigate to some extent the damage the Russian business community has endured, restore trust and confidence, and on the other hand demonstrate our friendly feelings, gratitude and recognition," Anastasiades said.

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