Day Ten of Draghi's Latvian Ordeal Shifts Scene to Brussels
Day Ten of Draghi's Latvian Ordeal Shifts Scene to Brussels
(Bloomberg) -- Mario Draghi’s reluctance to speak out on Latvia will be tested on Monday, the tenth day of a far-off crisis that has struck at the heart of his institution in Frankfurt.
European Parliament lawmakers will quiz the European Central Bank president in Brussels, against a Baltic backdrop of swirling allegations that touch on bribery, money laundering, Russian interference and North Korea. Latvia’s third-biggest lender is to be shuttered, and -- in an apparently unconnected development -- the Baltic nation’s central-bank chief was detained and released on bail by anti-graft authorities.
The ECB has had almost nothing to say in public about Governor Ilmars Rimsevics, like Draghi a member of the Governing Council that sets euro-zone monetary policy. Despite Latvian government calls for him to quit that risk breaching central-bank independence, the official line from Frankfurt is that it doesn’t know enough to assess the situation.
“They don’t seem to have enough information to come down on it decisively, and I assume that this is going to be the same tone that Draghi is going to strike,” said Piet PH Christiansen, an economist at Danske Bank A/S in Copenhagen. “The downside risk to saying too much is simply too high.”
No Powers
The ECB has been more active on ABLV Bank AS, imposing a moratorium and then declaring it as failing or likely to fail after the lender’s financial health was hit by U.S. accusations of involvement in transactions linked to North Korea’s missile program. While the ECB directly oversees the bank, supervisory head Daniele Nouy said she doesn’t have the investigative powers to combat money laundering.
The crisis is a distraction for Draghi, who might have hoped to come to the parliament to praise the euro area’s economic expansion and signal confidence that it’s getting back on track toward price stability. He’s scheduled to speak at 3 p.m.
A particular quandary, given the legally enshrined independence of central banks in the European Union, is how to deal with the calls by top government officials for Rimsevics to step down. Draghi told colleagues last week that he was dissatisfied at the lack of information received from Latvian officials, according to people familiar with the matter.
Latvian Finance Minister Dana Reizniece-Ozola said last week that she talked with Draghi, who will assess whether the rules were broken after the anti-corruption bureau provides more information, including whether ECB material was touched in their raids. She said on Monday that the bureau is in contact with the Frankfurt-based institution.
Murky Matter
One reason for the ECB’s quiet so far is the murkiness of the situation. The anti-corruption body hasn’t detailed the allegations against Rimsevics, nor has it charged him. It says the case isn’t related to ABLV, or to separate bribery accusations against him made by Norvik Banka JSC.
Rimsevics says he’s innocent and that there’s a concerted campaign to oust him. He’s challenging the bail restrictions that bar him from performing his duties, and said in a Bloomberg TV interview last week that he’s been in contact with ECB board members, though not with Draghi.
The drama was heightened further this weekend when the Leta news service reported that Rimsevics’s house was broken into on Friday, with many items either destroyed or stolen. His lawyer called it a “professionally well-organized operation.”
Pandora’s Box
Another worry is that the Latvian crisis could draw parallels with Greece, where a parliamentary committee last week decided to investigate the alleged involvement of central bank governor Yannis Stournaras in a bribery case surrounding Swiss drug maker Novartis. Stournaras denies any wrongdoing and said it was part of a political campaign to oust him.
Draghi’s testimony will last about 2 hours. Legislators won’t be finished with ECB matters though -- they’ll immediately move on to a hearing with Luis de Guindos, the Spanish economy minister who finance ministers nominated to become the next ECB vice president from June 1.
--With assistance from Aaron Eglitis and Alessandro Speciale
To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net.
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow
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