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Tsipras and the central bank

Yannis Papadimitriou / sgbMay 22, 2015

Greece's governing far-left party has opened a new front: It wants central bank governor Yiannis Stournaras to resign. He is accused of not following the 'national line' - but his political ambitions may play a role.

Symbolbild Griechenland Schuldenkrise wachsender Nationalismus
Image: Reuters/Y. Behrakis

It began with a sensational report in the "Efimerida ton Syntakton" newspaper that was particularly favorable to Prime Minister Alexis Tsipras: On May 9, it printed the contents of an alleged email from the Greek central bank to one or more journalists. This contained a worrying report about the government's first 100 days in office. It said Greeks' bank deposits had already fallen by 35 billion euros since the change of government, billions in EU funds would be frozen and the state would continue to be in default in its repayments to private creditors.

The Bank of Greece immediately denied that Governor Yiannis Stournaras or the in-house press office had sent such a government-critical email. "Efimerida ton Syntakton" published a copy of the disputed message, implying it was sent from a bank employee's personal email account on instructions from above. Leaders of the far-left Syriza government coalition then demanded, more or less directly, the resignation of the central bank chief.

Syriza party spokesman Nikos Filis said Stournaras was undermining the ongoing negotiations with Greece's creditors. Interior Minister George Katrougalos said bluntly: "In his place I would have resigned."

Syriza parliamentarian Thanassis Petrakos was of the same opinion. And his colleague Yannis Miras from Syriza's right-wing nationalist coalition partner ANEL proposed a quick solution: If the governor did not resign, he would visit the bank's headquarters and drag him out, he said in a TV interview.

Griechenland Finanzminister Yannis Stournaras
Greek Central Bank governor Yiannis StournarasImage: Louisa Gouliamaki/AFP/Getty Images

Syriza is also accusing Stournaras of failing to follow the "national line" in negotiations with donors, saying the central bank governor hardly put any pressure on ECB chief Mario Draghi to turn a blind eye and release additional liquidity for Greek banks.

Fear for the independence of the central bank

In the euro area, the rule is that central banks should be fully independent from political control. There is no provision for the dismissal of the head of a central bank except in the event of proven "serious misconduct." All the leaders of the Greek government apparently believe this is the case.

But conservative and social democratic opposition parties have demonstratively given their backing to the governor. The leading media in Greece have rallied to Stournaras' support. His removal would amount to a "witch hunt for purely domestic reasons" the conservative Athens daily "Kathimerini" warned. The paper said there was a campaign underway that was "harming the reputation of the country, because it shows that the political system ignores important European institutions."

Bank expert Babis Papadimitriou expressed a similar sentiment. "As a rule, politicians are not thrilled by central bank independence," he said on Athens television. The current allegations against the bank chairman showed that some government politicians did not believe Greece would remain in the eurozone, he said. Staying in the euro meant sticking to the rules and preserving the independence of the central bank, he added.

From finance minister to central bank head

Syriza accuses Stournaras of sometimes behaving like a minister in the previous conservative government. This accusation is not plucked from thin air: For two years the Oxford-educated economist served under conservative chief Antonis Samaras as finance minister and in this function contributed significantly to the relative stabilization of the Greek economy. However, at that time he also made a lot of enemies on the left. In June 2014, he moved from the ministry to the bank. He made himself a target last December, when he publicly spoke out against early elections. Stournaras has been a "red flag" for the leftists ever since.

Griechenland Alexis Tsipras Ministerpräsident
Greek Prime Minister Alexis Tsipras is not happy with his central bank governorImage: REUTERS/Alkis Konstantinidis

But economist Thanassis Mavridis, who runs the online business portal "Capital" is also unable to warm to Stournaras. "I understand the concerns about the independence of the Bank of Greece, but frankly, if we take the concept of independence literally, then Stournaras would not have been allowed to go directly from the treasury to the executive offices of the central bank," he said in an interview with DW.

A timeout of at least a few months would be appropriate in this case, he said, adding: "What would the Germans think if Wolfgang Schäuble were appointed new Bundesbank president overnight? Would that be a good sign for the independence of the central bank?"

A conservative hopeful

But Mavridis also has little good to say about the present government. On the contrary, he is especially critical of the way it has behaved - and wonders how they were able to attain knowledge of the content of a private email.

In any case, he said, ousting the central banker would probably have political repercussions. "The dispute over the central bank chief escalated only after rumors began to spread that if the left-wing government failed, Stournaras could become a new hope and step forward as interim prime minister. And these rumors are still circulating," he said.

The Syriza party newspaper "Avgi" has already worried its readers with scenarios like this. "Central bank chairman and party leader are two different things," it said. It had the following advice for the central banker: "If he wants to lead the political front of austerity, he can do this, of course - but not in his current position."