Panicos tells some stories in his book but leaves other untold

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By Stelios Orphanides

Panicos Demetriades (for those who don’t remember, he was the governor of the Central Bank of Cyprus from May 2012 until April 2014) published a book about his term which coincided with Cyprus’s largest ever banking and fiscal crisis.

He recently made a comeback but relaxed, not as a central banker this time but as a book author. His book is called “A Diary of the Euro Crisis in Cyprus”.

It already sparked a controversy in Cyprus mainly because of its unflattering remarks related to conversations with President Nicos Anastasiades who allegedly used colourful language, or the reference to the president’s relatives wiring funds from Cyprus Popular Bank, widely known as Laiki, days before the fateful Eurogroup meetings in March 2013.

The book gives the reader an account of the events that led to the culmination of the banking crisis in 2013 but sheds no real light on what really happened in the weeks and months before the banking crisis, not because of the stories the disgraced University of Leicester professor is telling, but because of the stories he is not telling.

For instance, his decision to resign after almost two years in office was because of the personal attacks he was exposed to, a rebellious board of directors, and uncooperative staff members at the central bank. Especially after everything he had done for the banking system. By the time he left office, it showed signs of stabilisation and the non-performing loans were beginning to be restructured which allowed the gradual lifting of capital controls, he says.

But Panicos tells the reader little about his dealings with Alvarez & Marsal (A&M), the company with which he signed agreements with. He tells not a single word in his book about a contract awarded to the US firm which included a provision for a 0.1 per cent recapitalisation fee, applied also to the bail-in of depositors, against the advice of the central bank’s legal advisor. He offers no explanation for the January 2014 press reports that he signed the agreement with A&M on March 28, 2013 and backdated it March 23, two days before the Eurogroup decision which sealed the fate of Laiki and meant that depositors at Bank of Cyprus would have to recapitalise it. After all, the “restructuring consultants,” Panicos tells us, had “impeccable credentials”.

By reading the former governor’s book, a naïve reader would assume that good old Panicos played an instrumental role in helping Cyprus introduce stricter anti-money laundering rules. But what he is not telling, is anything to do with his talks, which started days after his appointment, with the owners of FBME Bank, who sought to convert the licence of the FBME Bank Cyprus branch to a locally incorporated bank. He doesn’t say a word that press reports about his intention to initiate the procedure to make FBME Bank, the lender which a few months after his departure, US authorities branded as a financial institution of primary money laundering concern, caused a backlash in a number of European capitals and subsequently dramatically reduced the chances of Cyprus getting assistance for its banking sector.

Panicos also tells us little about a probable conflict of interest when he visited Cyprus months before his appointment, to speak at an event at the Strovolos co-operative bank. It was then, he says, when he met communist President Demetris Christofias who delayed negotiations with the troika in order also to secure special treatment for the cooperative banking sector. It was in 2012, he said, that he first met Christofias but he tells us nothing about the rumours that started circulating months before that meeting that he would succeed Athanasios Orphanides. The author of this article first heard about his appointment from a group of Laiki bankers as early as December 2011.

Panicos, the former central banker who boasts for being the saviour of the mismanaged and battered Cypriot banking system after doing whatever was in his power to give it the coup de grace, complains in his book that media had been hostile to him from the very beginning and that gossip columns exposed his “‘Bolshevik’ roots”.

But he doesn’t say that that the gossip was triggered by the references to his biography in an interview to the communist newspaper Haravgi. The interview published in 2011 was how he effectively declared his interest for the job. It included a reference to his “Bolshevik” grandfather, and thanks to his ideology he ultimately got the job.

Panicos’s book tells a lot but it is economical with the truth. Like a true Bolshevik, Panicos, who once proposed that Germany should ditch the euro to save the euro area, did what former Soviet leader Leonid Brezhnev advised. Brezhnev once said that “there is nothing more practical than a convenient theory”. Hence, the professor selected convenient parts of the truth to construct upon them a complex structure of lies or half-truths.

His book costs £23.99 (€27) and can be bought online. If you can afford it and have spare space on your bookshelf, it can offer you an amusing distraction from reality.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • jobanana

    This idiot should be in jail, not pedaling his pathetic excuses for his incompetence, mismanagement, and completely ignoring the blatant abuse in the banking sector. Demetriades’ decision to continue providing Laiki with emergency liquidity assistance in 2012, even though the bank was insolvent, resulted in the collapse of the economy. Of course he has issues with Anastasiades because Anastasiades pressured him out of his cushy job and brought in a very competent Harris Georgiades. Go away and leave us alone you P.O.S.!!!

    • Neroli

      He pushed him out of his job and put in Christalla. Harri is Finance Minister!

      • Disenchanted

        Indeed Anastasiades publicly admitted ‘we had to get rid of him’. So much so for respect of central bank independence.

      • jobanana

        May bad! You are right!

    • Disenchanted

      In a crisis central banks supply liquidity, if they don’t there is financial meltdown. That’s what financial history teaches us. Read Bernanke.

      • jobanana

        Not to a bank that has no chance to recover!

        • Disenchanted

          You are ignoring that a large part of Laiki was actually saved, that wouldn’t have been possible with liquidation, which is what would have happened without ELA. What was saved was a. insured deposits b. ALL loans, and c. All the employees and d. Physical infrastructure of the bank.

          Keeping Laiki going on ELA protected not just those depositors and borrowers but also the Republic from a disorderly default and the rest of the economy from financial system.

          • jobanana

            Had the central bank governor been doing his job in the first place the banks would have never been in the situation they were. Allowing the banks to give loans to customers who hadn’t the capital to cover the loans and with no intentions of paying it back. Allowing two or three mortgages on the same property. The entire banking system in Cyprus was, and still is a complete joke run by the elite who pad their pockets from others hard earned cash. So you say a good portion of laiki was saved, but at the expense of who? Marfin was allowed to buy 20% of Laiki back in 2008 despite a limit of shareholding of 10%. Then governor, Christodoulos Christodoulou, turned a blind eye to the transaction primarily to assist Papa Doc with laundering Milosevic’s money. The illegal transfer of money from Yugoslavia to Cyprus
            and its use for the purchase of weapons for the Yugoslav army was quickly facilitated by Vgenopoulos take over along with chairman Kikis Lazarides and his good buddy Tassos Papadopoulos. This bank should have been shut down years ago and the central bank is a disgrace! The corruption runs deep!!

          • Disenchanted

            There is no doubt in my mind that the problems started even before Orphanides’ arrival in Cyprus, let alone Demetriades who was handed a ticking time bomb. But the system is blaming those two in order to deflect attention from the real culprits, Christodoulos and Tassos. The system also didn’t put any pressure on Orphanides to do anything about poor lending standards. Although the CBC governor is independent, they are accountable to parliament. Baby Pap who chaired the finanace committee has huge responsibility over this. He never even asked Orphanides about lending standards or banking regulation. As Demetriades said, Orphanides was too relaxed about the banks, because he had adopted the Greenspan philosophy. Parliament had responsibility to shake him. They didn’t.
            Conclusion: biggest political responsibility for the banking crisis lies with the Papadopoulos clan.

        • comments-on-mail

          Says who? The bank had a recovery chance. it needed a capital injection and there was an initial agreement providing 10 billion euros for the recapitalization of the banking system.

      • Neroli

        Cyprus banks were kept alive on ELA!

    • comments-on-mail

      Your view that the provision of liquidity resulted in the collapse of the economy, is hilarious and a threat to logic at the same time.

  • Disenchanted

    Wasn’t Stelios Orphanides one of the journalists who supported the banksters?

    • Mario

      Compare and contrast Stelios Orphanides’ glowing review last year of the Athanasios Orphanides book with his review of the Demetriades book. It is patently obvious that SO is not only biased but actually doesn’t accept the narrative that the crisis we had was a banking crisis, just as it was in the US, Ireland, Iceland and the UK. I wonder whether he has even read the Demetriades’ e-book, published on Tuesday.

      • Disenchanted

        Interesting. Thanks. I didnt know that. He is clearly biased then. I wonder if he is related to the other Orphanides.

        • Mario

          No, he is not related to AO as far as I know but he clearly considers him as some kind of hero who is completely blameless for what happened in the banking sector

          • Disenchanted

            Hero indeed. 25% credit growth, property bubble, gamble on GGBs, bankers paying over the odds to buy problem banks in Russia. All happened under his watch.

      • comments-on-mail

        The specific journalist appears to be either biased or clueless. I don’t know which is worse.

  • Caulkhead

    With all that has come to light in Malta and the interest now being taken by the international anti money laundering authorities, it is only a matter of time before they seriously assign resources to looking into Cyprus. Once that happens the period under the Troika will seem like a walk in the park.

  • comments-on-mail

    Mr Orphanides has given to the readers of the CM a masterpiece of personal bias. His passionate writing renders his motives questionable the least and his article can be used as an example for defining the words “personal attack”. He is also repeating the moronic propaganda circulated in the media during the previous years when the media were attacking on Demetriades for “serious reasons” such as for travelling too often, or for how many cameras were installed in the premises of the Central Bank of Cyprus etc. and were repeating the views of the best bankers in the world who were claiming that our banking system collapsed because “bad” Demetriades stated the obvious that banks were engaging in casino banking. Interestingly we haven’t seen any article by Mr. Orphanides regarding the supervision of the CBC under the watch of of Dr. Orphanides, when the best bankers in the world disseminated the depositors money, by providing questionable loans to the mega-sharks, or when they were gambling for resurrection by investing in Greek Bonds.