Cyprus warned not to sack bank governor

The government of Cyprus confirmed Thursday it received a letter from European Central Bank President Mario Draghi warning against any action to dismiss the central bank governor.

Government spokesman Christos Stylianides confirmed an earlier MNI exclusive report about Draghi’s letter to Cyprus President Nikos Anastasiades in which he clearly states that a dismissal of central bank Gov. Panikos Demetriades would be a breach of the European treaty on central bank independence.

The letter stated that the ECB and would send the issue to the European Court of Justice.

“I confirm that we received the letter of Mr. Draghi. We have a firm position when it comes to the institutions’ independence,” Stylianides told reporters.

“But, in any case, handling the crisis on a political level is different than handling it on a technocratic level,” the spokesman added, declining to clarify whether the Cypriot government will drop efforts to push Demetriades out.

A senior Eurosystem official earlier Thursday told MNI about the letter, seen by MNI, which said the European regulations allow a central banker’s dismissal only if he not up to the job’s responsibilities or found guilty of serious offense.

“In the absence of such serious accusations, any effort to create a burdening case against a governor as a means of pressure would compromise his institutional independence,” the letter warned.

The senior Eurosystem source said Draghi’s letter made clear to Cypriot authorities that if they went ahead and found legal grounds in the Cypriot constitution to remove the central banker, the ECB would take the case to the Court of Justice of the European Union.

“The letter was strict and explained that the EU treaty guarantees the independence of the central banks and demands that national laws be aligned with the EU regulations,” the source said.

For the past three weeks Demetriades has been under attack from the government and political parties for allegedly withholding crucial information about the situation of the Cypriot economy and banking system.

The Cypriot parliament Wednesday started began hearings against Demetriades on grounds of providing incomplete information on banking data evaluation.

Furthermore, in an unprecedented move, President Anastasiades cancelled the appointment of the Deputy Gov. Sypros Stavrinakis, who was appointed as deputy by the previous leftist government a week before February’s national elections. Anastasiades, who said the constitution allowed the annulment, sent the case to the Supreme Court for a final ruling.

A senior Cyprus government source confirmed to MNI that the government with the cooperation of the attorney general and the parliament are trying to find legal loopholes to justify the dismissal of Demetriades