February 6, 2014 / 5:48 PM / 4 years ago

ECB warns Hungary yet again to honor its central bank's independence

FRANKFURT (Reuters) - The ECB has told Hungary again that it must respect the independence of monetary policymakers, saying the government cannot threaten central bankers with dismissal if they fail to submit a wealth declaration.

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

The European Central Bank has been at loggerheads for some time with the Hungarian government, which has stacked the central bank - the MNB - with its supporters. The ECB shows no sign of backing off.

Sanctions in a draft law would allow the Hungarian central bank’s governor, deputy governors and the members of the monetary council to be temporarily removed from office. The ECB said this could breach EU rules.

“The ECB would like to underline that Governors and other members of a decision-making body of a national central bank ... may not be dismissed for reasons other than those laid down in article 14.2 of the Statute of the ESCB,” the ECB said in a legal opinion.

The article in question states that central bank heads in the European Union may only be removed from office if they no longer fulfill their duties or are guilty of serious misconduct.

In the legal opinion dated January 31 and published on the ECB’s Internet site on Thursday, the ECB also repeated its criticism of Hungarian legislation regarding the prohibition of monetary financing of the government by the central bank and the appointment process of central bank policymakers.

The Hungarian central bank’s rate-setting panel is already made up entirely of members picked by Prime Minister Viktor Orban or his ruling Fidesz party.

The new appointments have been made since December 2012, when ECB President Mario Draghi told a conference in Budapest that the central bank must remain independent to be credible.

Hungarian Deputy Governor Julia Kiraly resigned last April, saying that by firing seasoned staff and changing procedures the central bank was risking long-term damage to the economy of Hungary, whose government is the most indebted in central Europe.

Reporting by Sakari Suoninen; Editing by Ruth Pitchford

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