A deputy Governor in Hungary’s Central Bank yesterday resigned in protest at what she said was a campaign by appointees of Prime Minister Viktor Orban to reduce the bank to a rubber-stamp for risky economic policies.
The Central Bank’s image for independence has declined
Deputy Governor Julia Kiraly launched a scathing attack on the new bank Governor put in place by Orban, saying that by firing seasoned staff and changing the bank’s procedures, he was risking long-term damage to the Hungarian economy, which is already the most indebted in central Europe.
Kiraly was the last remaining member of the eight-strong Monetary Council who was not appointed by Orban’s Government or his Fidesz party. Her six-year term would have expired in July.
The resignation of such a senior official could give new fuel to accusations from his opponents that Orban, who has clashed repeatedly with the EU and international lenders over his idiosyncratic policies, is eroding the independence of institutions which could challenge him.
Markets were untroubled by the resignation: foreign investors say even if they do not like Orban’s policies, they are sticking with Hungarian bonds and the forint currency because the yields are higher than almost anywhere else in Europe. Kiraly resigned four days after she abstained from a vote on economic stimulus measures proposed by the bank’s new management. She said she was given the document 35 minutes before it was put to a debate and vote, not enough time to give it proper consideration.
“Decisions have been made that could cause serious damage not only to the National Bank of Hungary but in the longer term also to the Hungarian economy,” Kiraly wrote in the resignation letter which she submitted to the Hungarian President.
“Taking all of this into account, I can see an increasing likelihood that decisions could be made that are not well-founded, and (which are) mistaken, for which I do not wish to take any responsibility.”
Orban, a 49-year-old conservative who made his name as a young dissident when Hungary was behind the Iron Curtain, has overseen four revisions of the Constitution, imposed swingeing ‘crisis taxes’ on some foreign firms and forced banks to write off some of the debt owned by Hungarian households.
His opponents accuse him of harming Hungarian democracy and gambling with economic stability. The EU says he has eroded the independence of the courts, the media, the central bank and other institutions, pulling Hungary out of Europe’s mainstream.
He says he has saved Hungary from a Greek-style economic collapse, his reforms are democratic because he won a huge majority in a 2010 election, and he is under attack because he threatens the interests of foreign business lobbies.
Until recently, investors had looked to the Central Bank as a strong institution capable of off-setting Government policies. However, its image for independence has declined since Gyorgy Matolcsy, an Orban ally, was sworn in as Governor last month.