Greece in New Row Over Attack on Central Bank Independence

Marcus Bensasson
Greece in New Row Over Attack on Central Bank Independence

(Bloomberg) -- Greece was embroiled in a fresh row over central bank independence following a leak of a phone conversation between its governor, Yannis Stournaras, and a minister.

Tensions have periodically flared up between Stournaras and the government since Prime Minister Alexis Tsipras was elected in 2015 on a platform of opposition to the country’s bailouts. The latest exchanges come as central banks worldwide have come under criticism from elected officials, from the Federal Reserve to the Bank of Italy.

The Greek clash concerns the recording of a conversation between Stournaras and Alternate Health Minister Pavlos Polakis, who demanded the governor probe loans to opposition politicians, parties and media.

Stournaras responded by calling it “historically unprecedented by European standards” and a “gross institutional transgression.”

The row blew up after prior media reports that Attica Bank -- which as a non-systemic bank is regulated by the Bank of Greece rather than the Single Supervisory Mechanism -- extended loans to Polakis on favorable terms. Other reports said the call came in response to Stournaras convening a meeting of Attica Bank’s management to inquire about the loans.

In the transcript leaked to Documento, which Polakis posted on his Facebook page, the minister said he welcomed the scrutiny of his loan, but he expects similar scrutiny of loans to other politicians. If this doesn’t happen he’ll “go over there and not go away unless” Stouranaras orders the investigation, according to the transcript.

After Stournaras’s statement, Polakis posted again on Facebook to confirm the authenticity of the transcript, but denied that he recorded or released it.

A Greek prosecutor said on Tuesday evening that he will investigate whether there was a recording of the conversation between two men, as well as how their discussion was leaked to media, according to Kathimerini.

Tsipras’s office said the government respects the independence of the Bank of Greece, “even when the governor has strayed onto crucial issues of economic policy.” The statement made no specific reference to Polakis.

In Brussels, European Commission spokesman Margaritis Schinas said the EC has the “utmost respect for the independence of all the central banks of the euro zone and of the central-bank governors.”

(Adds prosecutor’s intetion to investigate the case in eight paragraph.)

--With assistance from Vassilis Karamanis, Jones Hayden and Sotiris Nikas.

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss

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