Parliament’s budget and economy committee is expected to interview Prime Minister Viktor Orbán’s choice – whoever it is will be a shoo-in – for the job of Central Bank Governor this Friday. Orbán said as much in a HírTV interview a week earlier. The prime minister has kept the identity of incumbent András Simor’s successor a closely guarded secret in order, he says, to prevent “speculation” (against the forint, presumably, as speculation over who will succeed the hawkish Simor has been rampant for months).
Matolcsy ‘almost certain’
Despite this, the consensus among domestic media, citing leaks and any number of unnamed sources, is that National Economy Minister György Matolcsy will be the next head of the Hungarian National Bank (MNB).
Reports have surfaced recently that the government’s chief International Monetary Fund negotiator Mihály Varga – who served as finance minister under the last Fidesz government at the turn of the century – is preparing to take the reins at the National Economy Ministry.
This has only reinforced the feeling of inevitability about Matolcsy being shoehorned into the Central Bank post when Simor steps down Monday. Left-wing broadsheet Népszabadság and right-wing daily Magyar Hírlap reported Tuesday that the thing is “certain” or “almost certain”.
Furthermore, the whispering cam-paign seems to have primed the ever-twitchy “markets” not to react with shock if the architect of Hungary’s “unorthodox” economic policies (deeply unpopular in banking circles) ends up with control of the money press.
Little leeway anyway
Some analysts quoted this week were even dismissing the hysteria over the MNB succession – in stark contrast to the horror many expressed a year or more ago when the idea of Matolcsy as national bank chief floated to the surface amid a general outcry (and EU infringement proceedings) over the government’s attempts to limit the independence of the bank.
In any case, whoever takes charge will be constrained by economic reality: a devaluation of the forint – such as might follow a drastic base rate cut or, more drastically, a rolling of the printing presses – is no get-out-of-debt-free card for Hungary. Devaluation or quantitative easing is not an option for a country with half of its 80-per-cent-of-GDP government debt and a worrying proportion of its private debt denominated in foreign currencies.
Another rate cut
What is more, the Central Bank’s Monetary Policy Council under Simor has already been as dovish as perhaps it could get away with recently. A seventh 25-basis-point cut in as many months on Tuesday brought its benchmark lending rate down to 5.25 per cent.
Lastly, it appears that whoever replaces Simor, the government is likely to crow about his leaving under a cloud, with an inquiry under way into alleged irregularities over the passing of data on domestic banks to the IMF. Facing Parliament’s economics committee on Monday, Simor said the MNB’s operations have been “well planned, careful, compliant with regulations and, from the viewpoint of taxpayer interests, economical”, state news agency MTI reported.
Simor denies allegations
Rejecting the findings of a recent report by financial regulator PSZÁF – headed by a former Fidesz politician – Simor said the MNB was legally obliged to furnish the IMF with information on the financing situation, net foreign exchange position and foreign-exchange swap transactions of Hungary’s seven largest banks. The data did not relate to private individuals or non-financial firms, he said.
Nevertheless the committee – dominated by government lawmakers, a reflection of Fidesz’s two-thirds parliamentary majority – voted 18 to four for a declaration stating that the MNB had violated legislation governing credit institutions.
Prime Minister Viktor Orbán has kept constant pressure on Simor since his government took office in 2010, and repeatedly refers to him as an “offshore knight”, a reference to Simor’s alleged overseas business interests. Whoever succeeds him, it will not be an “offshore night”. That is pretty much all Orbán has divulged, repeatedly, about his plans for Simor’s replacement over the past year.