Hungary delays vote on central bank law

By bne IntelliNews June 5, 2012

bne -

Hungary postponed a parliamentary vote on amendments to its central bank legislation on June 4 following criticism from the European Central Bank (ECB) and insistence from the International Monetary Fund that it will not open talks on a loan programme with Budapest until it is satisfied with the changes. Coming on the back of a sharp slide in Hungarian stocks, bonds and currency late last week after Hungarian officials blasted the EU for trying to "dictate terms", investors are hoping that the move means Budapest is ready to finally play ball to negotiate a new bailout loan. However, comments from the ruling Fidez party remained ambiguous.

Antal Rogan, head of Fidesz party's parliamentary group, said parliament is now likely to vote on the bill before going into summer recess on July 15, Bloomberg reports. Mihaly Varga, Hungary's newly-appointed chief bailout negotiator, asked on June 2 for the vote to be delayed to allow the government time to consider the last-minute proposals from the ECB. Budapest promised to change the legislation (which was amended in January to tighten government control of the Magyar Nemzeti Bank) after the EU said it would drop infringement proceedings against Hungary and gave the green light to the bailout talks on April 25, but has since frequently insisted it will not respect all the requests.

The latest round of provocation from Prime Minister Viktor Orban came on May 31, and combined with the panic surrounding Greece, sank the forint to its weakest level against the euro in more than four months on June 1, after sliding 4.7% in May. It recovered by around 0.2% to 304.39 per euro on the news that the vote had been postponed, but the markets are clearly pushing for Budapest to make the final push to open bailout talks. "Our baseline is unchanged in that central bank act changes will occur at some point when forced by the market; we're not at that stage yet but nearing it," Peter Attard Montalto of Nomura wrote in a note.

Hungary's plans to expand the Monetary Policy Council and nominate a third vice president without consulting the central bank remain a concern, the ECB said. It is that issue more than any other that appears to concern the IMF and EU also. The IMF confirmed on May 31 that it has no date for the possible start of aid talks pencilled in, and is in touch with the Hungarian government on "actions needed" to ensure central bank independence, spokesman Gerry Rice said.

The failure to include all the demands and pass the amendment even has the EU pulling back from what has been an extremely concilatory stance over the past month or so. European Commission spokesman Olivier Bailly told reporters: "We want these clarifications to be fully made. This lifting of the infringement will be done provided that the national law on the central bank is fully amended."

However, few expect Budapest to move quickly to meet the demands, preferring instead to continue to play for time, offering further proof that the government has little real inclination to negotiate a new loan programme - and comply with the attached conditions - but is instead merely dangling the prospect in a bid to keep the markets off its back until the crisis pulls back far enough to reopen access to reasonably priced debt.

Reflecting that, a Hungarian official followed up news of the delayed vote by claiming on TV that Budapest is open to more changes to the central bank law to boost the MNB's independence, but held back once again from specifying the exact changes. Peter Szijjarto, state secretary at the prime minister's office, told M1 that Hungary will compromise "within the bounds of reason" regarding a planned increase in the number of policy makers and the nomination of a third vice president at the central bank.

On June 3, spokesman Andras Giro-Szasz reiterated that the government won't make concessions on its "sovereignty" or national interest for an aid agreement, and claimed that delays to starting talks on the bailout were caused by the EU's slow decision-making.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Erste claims Hungary is breaking peace deal with banks

bne IntelliNews - Hungary will breach its February agreement with Erste Group if it makes the planned reduction in the bank tax conditional on increased lending, the Austrian lender's CEO ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.