Cyprus Editorial: Who should be the new Governor of the Central Bank

09 February, 2019 | Posted By: Financial Mirror

With the tumultuous five-year term of Chrystalla Georgadji coming to an end very soon, the President will be tasked with appointing a new Governor of the Central Bank, who will have to remain independent, but will be commonly expected to take a more active role in safeguarding the integrity of the economy.

Although Eurozone policies are determined by unanimity in Frankfurt, some suggest that this, in effect, means our Governor simply rubber-stamps joint decisions, while local government is obliged to abide by central directives.

Without wanting to exceed the terms of employment of the new Governor, is that what we really want, the highest-paid civil servant anyone could wish for?

With Georgadji at the helm of the central bank, the Cyprus economy has lived its toughest post-crisis era, which the incumbent could very rightly argue that she had inherited, with little say in what caused the downfall of the banking system and the economy attached to it.

Then again, the outgoing Governor, who will probably be leaving on or around April 11, on the anniversary of her controversial hiring, faced harsh criticism from all political parties, with the ruling party going to extremes to try and defend the appointment. On Georgadji’s watch, we saw the odd way with which the FBME Bank was folded, with the collapse of the Co-operative Bank and its, in effect, takeover by Hellenic making the loudest noise.

At the same time, Cyprus experimented with new gimmicks, such as the widely criticised investment-for-citizenship scheme, that may have earned about 5 bln euros for a desperate government, but the money was not put to productive use and has simply been used to plug holes in the state payroll. The same could be said about the energy wealth fund, a tool that was never implemented and has taken politicians nearly a decade to formulate, as the money from that, too, has been used to pay down debt, which in turn was created by uncontrolled p0ublic sector spending, mostly on wages and pensions for civil servants.

Should the Governor deal with such issues, or will politicians cry foul and say this falls widely out of the central bank chief’s job description?

Whatever the outcome of this debate, the choice of new Governor must be determined based on integrity, knowledge and total absence of conflict of interest, with the latter criteria making it extremely hard for this administration to maintain.

There are many issues that require the new Governor to be more outspoken, similar to how Bank of England head Mark Carney often ruffles the feathers and has openly spoken against Brexit, not on ideological or national issues, but purely on economical viability concerns.

If the President is having trouble avoiding pressure from party chiefs and friends for this appointment, perhaps he should approach the recruitment professionals who will head-hunt the right person for the job, for a change!