Jan Macháček

Hledání

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Czech Business Weekly

A few words about Klaus' new ČNB

14. 02. 2005
The presidential powers of Václav Klaus peaked on Feb. 4 when he exchanged four members of the central bank board at once. Actually, he replaced only three members, because he had decided that governor Zdeněk Tůma would stay another six years.

Presidential powers regarding the central bank are the most important ones he has under the constitution. This is not only because the central bank is the most powerful economic institution in the country; this clout is also due to the Czech Constitution, which specifies that the nomination of board members is solely the president’s prerogative. There is no Senate in this case that can limit or scrutinize the president’s choice.

This strange situation partly stems from the fact that in 1993, when the constitution was approved, there was still no Senate. The Senate would be an ideal counterbalance to presidential powers because it has nothing whatsoever to do with budgetary policy and little to do with economic policy.

But in any open, democratic society, the process of a president choosing candidates should be open, transparent and subject to public scrutiny. The president should announce the names of candidates at least a couple of weeks ahead of their official selection. He should also make public the whole selection process: Who did the president talk to? Did he only talk to his advisers or did he also talk to those in the markets and to analysts?

Months before the official ceremony, the names of the candidates circulated only in the form of rumors. About two weeks before the ceremony, Klaus confirmed in an interview with Reuters that the names in the media were more or less correct.

That was good for Klaus because it further limited the media’s chance to make potential candidates the subject of public debate and critical scrutiny. And there was clearly no public discussion about the candidates whatsoever. This is very bad news for all those who strongly believe public discussion benefits all.

The good thing about Klaus' choice is that he respected the need for some continuity. He could have easily replaced the majority of the board all at once. Fortunately, he was very well aware that markets could have reacted very negatively to such an abrupt change in monetary policy. Two new members of the board, Robert Holman and Miroslav Singer, are very well-known opponents of the euro. At a recent session of the Center for Economics and Politics – the think tank of Klaus' fans – Singer said, for instance, that the new European Constitution could potentially make the euro a very unstable currency. Even though the role of the central bank in the euro adoption process is — above all — technical and advisory, markets could react negatively if a central bank were suddenly controlled by euroskeptics.

At least Singer and Holman are well-educated economists. A bigger question hangs over Pavel ˘Režábek, former head of the Czech Consolidation Agency (ČKA), the state institution that deals with bad loans. He was in charge of many suspect decisions at this institution. According to insiders, " ˘Režábek to the central bank" was the will of political parties, especially of the KDU-ČSL and ODS. ˘Režábek has never said anything publicly about monetary policy. What’s more, Klaus knows that perfectly well. ˘Režábek has never published anything about it.

In this case, as in the case of some Constitutional Court judges, it’s clear Klaus is picking people who will be grateful to him in the future for their jobs. This situation will always stand him in good stead, but it clashes with the prerequisite that a good central-bank board can work well only in an atmosphere of mutual trust. The nomination of Režábek will make such trust difficult.

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