Jan Macháček

Hledání

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Czech Business Weekly

Klaus, inflation put spotlight on bank

04. 10. 2004
For a long time, the Czech National Bank (ČNB) was surviving quietly in a soporific “no news” environment. Under global pressure consumer price inflation usually stayed much lower than the official targets of the central bank. That was the reality of the world: Japan was fighting deflation and the United States and Germany were also poised on the brink of falling prices.

The first couple of years of the new millennium brought with it interest rates at historically low levels. That meant politicians gave up complaining about the “hawkish” central bank. It was basically all quiet on the banking-supervision front. With the exception of the collapse of Union Banka at the end of 2002, there was no major banking scandal. All major Czech banks are in the hands of experienced strategic owners these days, which means that another crisis isn’t likely.
But the sleepy, happy days are now past. The central bank is back again in the spotlight. Inflation is also back. Since June, the central bank has increased interest rates twice.
On repeated occasions since the early summer government shakeup, members of the new government of Prime Minister Stanislav Gross have quite frequently criticized the central bank for its anti-inflationary policies. We cannot expect that anyone from the current batch of central bank chiefs would be scared by these ministerial utterances. If they want to continue in their jobs, the source of their fear should lie elsewhere.
There is a second factor that has been pushing the central bank into the headlines. The tenure of all but two members of the central bank’s board will expire in February 2005. According to the constitution, Czech President Václav Klaus has the right to name members of the central bank board without consulting any other constitutional authority. As far as the bank goes, it is going to be Klaus’ autonomous choice. Since he is an economist (at least he considers himself one) and has a considerable ego, we cannot expect that he is going to consult with many people, even informally.  
Klaus has already revealed some priorities concerning his selection. He wants people with more experience than most of the current members of the central bank board. But he also said he cannot rule out that some of the current members of the board may continue in their positions.
Even if the current bank board is subject to major change, this won’t amount to disaster. The country is not in the mid-1990s any longer; there are a lot of people within the central bank itself who are qualified and educated enough to replace the current members of the board.

A big puzzle  
But this is where we run up against the principle of seniority, which Klaus is pushing for. Most of the economists of Klaus’ age do not have the same all-around education as the upcoming generation of economists. Once we start to take all this into account, it seems very probable that Kamil Janáček, the chief economist at Komerční Banka and a Klaus loyalist, will make it to the board. If someone is to stay from the current board, it might well be Michaela Erbenová. The rest of Klaus’ nominations remain a big puzzle.
The good news may be that once the nominations are made, Klaus doesn’t — at least constitutionally — need to concern himself with the central bank much more.

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