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Cyprus President Continues To Blast Central Bank Governor

by Jim ONeil on April 8, 2011

in uk banks

Athanassios Orphanides, Central Bank Governor, was the subject of a recent attack from Cyprus President Demetris Christofias regarding the financial situation in Cyprus. The Cypriot President blamed the Central Bank governor for failing to control Cypriot banks that made heavy investments in Greece.

The result was a credit agency downgrade in the sovereign credit ratings for Cyprus.

This was one of many attacks on Mr. Orphanides regarding his comments about problems faced by the Cypriot economy and how they should be rectified. Unemployment in Cyprus is currently at a record 7.2 percent and the country is home to an increasing number of asylum seekers and migrant workers. President Christofias stated that the average EU unemployment rate is actually much higher.

The President blamed Mr. Orphanides for not forcing Cypriot banks to release their funds in Cyprus, instead allowing them to take this money overseas. He also blamed opposition parties and claimed the media did not focus on the work of his administration. Disy, a main opposition party, responded by saying that the government did not have a plan to address the crisis but instead spent its time blaming others for the situation.

President Christofias stated that the rating downgrades were due only to Cyprus bank exposure to Greece. He blamed Mr. Orphanides for not forcing the Central Bank to cut interest rates, despite his requests. Cyprus charges six to seven percent interest, while the European Central Bank interest rate is one percent. Lowering the interest rate would allow businesses and citizens to obtain cheap loans.

Mr. Orphanides stated that international markets do not view the economic forecast for Cyprus in a positive light due to delays in addressing long-overdue reforms. He called for quick action by authorities in order to improve public finances. He believes the S&P downgrade occurred due to a weak economy in Cyprus and the potential government inability to aid banks, if needed.

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