Czech president confirms plan to appoint Rusnok as central bank head

By bne IntelliNews January 20, 2016

Czech President Milos Zeman reiterated on January 20 that he plans to appoint former aide and long time ally Jiri Rusnok as head of the central bank later this year.

The statement confirms that the former interim prime minister, now a board member at the Czech National Bank (CNB), remains Zeman’s favourite to replace Governor Miroslav Singer, despite the apparent divergence in Rusnok’s views on monetary policy from those of his mentor in Prague castle. Zeman has regularly slammed the CNB's cap on the koruna, but Rusnok has increasingly expressed support for the regime over the past year or so.

What matters is the candidate’s expertise not whether he shares my views, Zeman told Hospodarske Noviny. The president, who is solely responsible for appointing central bankers, has repeatedly called on the CNB to scrap its policy to keep the koruna below a limit of CZK27 to the euro. 

Zeman claims the policy - in place since November 2013 - hurts most Czechs and is an intentional move by the board - in the main appointed by the previous president - the virulently euroskeptic Vaclav Klaus - to delay the country’s accesssion to the euro. Zeman, who will appoint several new members to the CNB's monetary policy board this year and next, has said candidates should be supporters of euro adoption, and be opposed to the currency cap.

However, Rusnok, who served as a prime minister of the interim government appointed by Zeman in 2013 and was also a finance minister in Zeman’s cabinet in 2001-2002, has become a supporter of the cap since joining the CNB. Many analysts credit the regime with pushing Czech growth to amongst the quickest in the EU last year, and staving off the deflation that has blighted others in the region. The CNB has pledged to keep the cap in place until the end of 2016, but recent statements suggest the regime may be extended into 2017.

The next appointments to the seven-member rate setting board are due in July, when the terms of Singer and Kamil Janacek expire. Two more posts open in 2017 for Zeman to fill before his term ends in 2018.

The president also indicated that he is willing to discuss Janacek's successor with Rusnok and Finance Minister Andrej Babis. "The news should have little impact on the koruna," forecast analysts at KBC, which sat flat at CZK27.01 to the euro at midday.

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