NICOSIA  - Cyprus on Saturday appointed a professor at an English university as its new central bank governor to replace Athanasios Orphanides at a time when the small EU member's economy is struggling.

Panicos Demetriades, a former central bank official and currently professor of financial economics at the University of Leicester in central England, will take over as governor. Government spokesman Stefanos Stefanou said his five-year tenure would officially begin on May 3.

"In these very difficult times for the Cyprus economy, and the problems in the banking sector, we should all stand next to the new central bank governor," he told reporters. The change comes at a time when the Cyprus economy is struggling to find its way out of recession, with a Greek-debt exposed bank needing to find around 1.5b euros to recapitalise.

There is also a fear that the cash-strapped government may need to step in to bail out the banking system.

Orphanides, a vocal critic of the government’s spending strategy, was himself officially criticised for not closely monitoring the banking system and accused of allowing it to be overexposed to Greek toxic debt.

Opposition parties had petitioned for the influential banker to stay.

Nicosia is also preparing for a fresh austerity drive which aims to get the island's bloated deficit down to below the EU-required 3 percent of GDP this year.

It is committed to reducing the budget deficit to 2.5 percent of GDP from a bloated 6.3 percent in 2011.