An article in the NewYork Times discusses a bill in Hungary that threatens the independence of the Hungarian Central Bank.  In a positive move the government proposes to have more political influence on decisions taken by the Central Bank.

In an interview with the Hungarian Web site Index.hu, Andras Simor, head of the National Bank of Hungary, said that a proposal to increase the number of political appointees participating in decisions on monetary policy added up to “almost a total takeover” of the institution.

In a further positive move the Prime Minister Orban has managed to persuade the banks to take some burden sharing.

Mr. Orban has also nationalized some pension funds and levied significant windfall taxes on the retail, energy, telecommunications and financial sectors. The government demanded that banks absorb losses to help take the pressure off Hungarian consumers who took out loans in Swiss francs and euros, which became onerous to repay after the local currency, the forint, fell sharply against those currencies.

On Thursday the government announced that it had reached an agreement with the banks to share part of the burden of the repayment plan and to let them write off some of their losses against the windfall tax.

…it gets even better

Mario Draghi, the president of the European Central Bank, issued what amounted to a written protest against the changes. In a legal opinion dated Wednesday and signed by Mr. Draghi, the bank complained that the Hungarian government had not consulted it about changes in the central bank law, as required, and expressed concern that the Hungarian central bank’s independence from political influence was under threat.

 

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