ECB expresses concern about the independence of the central bank of Hungary

With ongoing developments in Hungary, it is interesting to note of new changes in  Central Bank of Hungary (called Magyar Nemzeti Bank). ECB says the new changes in MNB are undermining the independence of the central bank:

Hungary’s authorities asked ECB’s views on the new laws regarding MNB. ECB opined:

On 22 December 2011 the Governing Council of the ECB adopted Opinion CON/2011/106 on the independence of Magyar Nemzeti Bank. In this opinion, the Governing Council of the ECB expresses its concern about, inter alia:

Provisions in the draft law on the MNB that could undermine the central bank’s independence. In particular, against the backdrop of constant changes in the composition of the MNB’s decision-making bodies, the increase in the number of members of the Monetary Council, together with the possibility of increasing the number of deputy governors – without due consideration of the MNB’s needs – gives rise to concern as to whether this could be used to influence the decision-making process, to the detriment of central bank independence.

  • Provisions in the new draft constitutional law that affect the personal independence of the central bank’s governor. In particular, by appointing a new President with authority over the Governor of the MNB, who would become the Vice-President of the new institution, the personal independence of the MNB’s Governor would be impaired and Article 14.2 of the Statute of the European System of Central Banks concerning the possible reasons for dismissing the Governor of a national central bank would be breached.
  • The Governing Council of the ECB has requested the Hungarian authorities to bring their consultation practice into line with the requirements of European Union law and to respect the obligation to consult the ECB. Three major revisions of the central bank law in 18 months are incompatible with the principle of legal certainty.

So you have a new President of the central bank and the Governor becomes the vice-chairman??

What is even funnier is Hungary’s economy ministry asking ECB for its comments on the new MNB law. What did it expect from ECB? Kudos for the move?

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