Cypriot finance minister Kikis Kazamias, credited with spearheading an austerity drive pulling Cyprus back from the brink of an international bailout, has resigned for health reasons, the government said on Friday.
The announcement means Central Bank Governor and ECB Governing Council member Athanasios Orphanides has lost a key ally in the Cypriot government and is now unlikely to be reappointed next month.
A statement from the government spokesman said Cypriot President Demetris Christofias would announce a limited cabinet reshuffle on Monday, March 19.
In the statement, spokesman Stefanos Stefanou denied reports in at least two newspapers that Kazamias was resigning because of disagreements with President Demetris Christofias.
"The finance minister had some days ago submitted his resignation to the president, exclusively because of health reasons,» Stefanou said.
Vassilis Charly, a senior manager at Bank of Cyprus or Phidias Pelides, a chartered accountant and former head of Cyprus's Investment Promotion Authority (CIPA), are reported to be in the loop as replacements.
Newspapers reported Kazamias was bowing out partly because of his health, but also because of the president's refusal to re-appoint Orphanides at the helm of the central cank for another five years.
Orphanides's term expires on April 30.
A member of the ruling Communist AKEL party, Kazamias was appointed in August 2011, when Cyprus was on the brink of an economic meltdown after a munitions disaster prompted the collapse of the ruling governing coalition.
He helped mend frayed relations of the government with Orphanides, whom some government officials blame for the heavy exposure of Cypriot banks to Greek debt.
The exposure is cited as a key factor in repeated ratings downgrades, and now two of the world's three ratings agencies class Cypriot sovereign debt as junk.
Central Bank sources say Orphanides had warned banks about their exposure to high-yielding sovereign debt on several occasions.
Kazamias was taken ill with an internal infection to his leg in late January and has been under constant medical supervision.