Preface

Summary

Within hours of the announcement of my decision to step down from the governor’s post at the Central Bank of Cyprus (CBC) on 10 March 2014, The Economist published an article entitled “A blow against [central bank] independence” (The Economist 2014). The article argued that my resignation set “a worrying precedent in the euro zone”, but went on to qualify this by suggesting that Cyprus might be a special case. Specifically, it referred to the “disastrous events of March 2013” and “Cyprus’s continuing plight”, with Bank of Cyprus, the country’s biggest bank, being in a “dire state”. It also indicated that my resignation had something to do with the blame game after the crisis and the Cypriot central bank’s poor job in supervising the banks, failing to mention that I was appointed only in May 2012 and the crisis was already simmering before I took office. The article correctly stated that my relations with President Nicos Anastasiades, who came to power ten months after I had been appointed by the previous government, “were not just poor but non-existent”. It failed to explain, however, that Anastasiades was surprisingly close to the bankers who caused the crisis. Nonetheless, and notwithstanding the qualification about Cyprus being perhaps a special case, the article concluded that “similar pressures may be exerted elsewhere” that could “undermine the capacity of the ECB [European Central Bank] to act in the interests of the euro zone as a whole”.

It was important to set the record straight. That is largely why I felt compelled to write my first book, soon after I returned to my academic post in the United Kingdom; A Diary of the Euro Crisis in Cyprus: Lessons for Bank Recovery and Resolution (2017) tells the story of the Cyprus crisis from my first day in office (3 May 2012) to the last (10 April 2014). It explains the root causes of the Cypriot crisis, and explains how the country’s banking system doubled in size between 2005 and 2011 to reach 9.5 times the size of the country’s gross domestic product (GDP).