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April 8, 2013 10:57 pm
A deputy governor of Hungary’s central bank resigned on Monday, warning that the bank’s new management team had insufficient qualifications and experience for the job.
Julia Kiraly, an economist whose six-year term as deputy governor was due to end in July, wrote to Janos Ader, Hungary’s president, saying decisions made since governor Gyorgy Matolcsy – a controversial former economy minister – became governor last month could cause “serious damage” to both the bank and national economy.
“The new management of the central bank, due to a lack of appropriate professional experience, is not capable of guiding the professionally competent staff of the central bank,” Ms Kiraly wrote. She added that she believed the new management “cannot always appropriately judge why certain developments in the market happen and what kind of economic factors contribute to these developments”.
The changes could jeopardise the bank’s international reputation, which had been “established over a long period of time”, she said.
No one could be reached at the central bank on Monday for comment.
The resignation marks a new twist in the battle for control of the central bank which began when Viktor Orbán, the centre-right prime minister, and his Fidesz party, won a two-thirds majority in elections almost three years ago.
Mr Orbán made no secret of his hopes for the removal of András Simor, the previous governor. That caused concerns about the independence of the central bank in Brussels and at the European Central Bank.
But Mr Simor stayed in his post until the beginning of March, when Mr Matolcsy, who as economy minister had been the architect of Hungary’s “unconventional” policies under the Fidesz government, replaced him.
Mr Matolcsy moved immediately to install his own men, dismissing three senior managers and stripping the powers of the then two remaining deputy governors in his first week.
Apart from the rapid leadership changes, however, markets have seen policy decisions to date by the new management as relatively moderate.
These include the first rate-setting decision of the new monetary council – a modest cut of 25 basis points – two weeks ago. The bank also announced a package last week designed both to stimulate loans to small and medium-sized businesses and relieve them of some of their foreign-currency debt.
The forint on Monday shrugged off news of Ms Kiraly’s resignation, ending the day up 0.8 per cent against the euro at Ft296.72.
Ms Kiraly’s resignation, given her reduced powers and limited remaining time in office, was largely symbolic, observers said.
But Otilia Simkova, of the Eurasia Group, warned that Ms Kiraly’s resignation was a “net negative” in terms of the outlook for market trust in the central bank.
“Stark statements in her resignation letter reinforce concerns over independence of the bank that investors have been harbouring for quite some time now,” she told the Financial Times.
Ms Kiraly, as an insider and high ranking official of the bank, had “slammed the monetary council, Matolcsy’s conduct since appointment and the overall situation at the institution with her critique”.
“This is likely to leave its remaining credibility in tatters,” Ms Simkova argued.
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