Three ruling coalition MPs have proposed amendments to the central bank law, which basically aim to expand government's control over the Monetary Council (the rate setting body) of the National Bank of Hungary (NBH). According to the proposal the number of MC members should increase to 9-11 from the current 7-9. Out of those the central bank governor and vice governor in charge of monetary policy have the right to be in the Council, while the PM nominates five members on the body. NBH governor proposes four other members, but the PM has the right to veto his selection. All nine regular members would be formally appointed by the resident, reads the proposal. One of the authors of the proposal, MP from junior coalition partner SZDSZ Andras Bohm, substantiated the changes with the need of closer cooperation between monetary and fiscal authorities, which have clashed several times since the Socialist party won the 2002 elections. The current central bank law stipulates that finance ministry can have representative on the MC but without voting rights.
IntelliNews comment: The proposed changes are dangerous approach against the independence of the central bank. Both theoretically and practically it is clear that independence of the monetary and fiscal policy is crucial for the proper functioning of the markets. Furthermore, PM Gyurcsany has repeated on several occasions that he would like to see the forint weaker than it is currently trading (12-13% on the strong side of the floatation band). However, enforcing those views on the MC can pose serious danger on NBHÕs main goal to maintain price stability. Although the proposal is still to be debated, there are two facts that bear negative implications. First of all the central bank law can be amended via simple majority and secondly, the proposal was put forward by MPs from both parties in the government coalition, which implies that there might be political agreement on the issue.