Exclusive: Hungary's central bank reels from sweeping takeover

Thu Mar 14, 2013 12:31pm EDT
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By Krisztina Than and Sandor Peto

BUDAPEST (Reuters) - The biggest meeting room at the National Bank of Hungary, once a sanctuary for academic debate between the bank's experts and leaders, is now the preserve of one of new Governor Gyorgy Matolcsy's closest aides.

The change of use is symbolic of a sweeping takeover during which some of the bank's most respected economists were dismissed within less than a week, several sources at the bank told Reuters on condition of anonymity.

Investors expressed concern about the bank's independence with the appointment of Matolcsy, a close associate of Prime Minister Viktor Orban who has been accused by the European Union and United States of undermining Hungary's young democracy.

The new governor, who hiked taxes on banks and key sectors and nationalized private pension assets in his previous role as economy minister, is only in his second week in the job.

He has not yet outlined what the bank will do, although he says he is considering new tools to help the sickly economy. The bank says the dismissals were designed to keep a lid on costs and there were other rooms where debates could be held.

But his early decisions about how the bank itself will run suggest Matolcsy does not want an organization that will question his plans, a concern for investors who believe the central bank should be a brake on any government policies that could weaken the currency.

During a process which the sources described as "surreal" and "brutally arrogant", newcomers strode the bank's corridors and took pictures of rooms where employees were sitting without giving them any information.

"What you can feel now is a sense of uncertainty which makes people feel intimidated," one of the sources said.   Continued...

A man stands behind a glass board in the visitor's center of the National Bank of Hungary (MNB) in Budapest October 31, 2008. REUTERS/Laszlo Balogh