The Hungarian cabinet has rejected the ECB’s opinion over a plan to cut central bankers’ pay, so the legislation will proceed to a vote next week.
The ECB feels the bill could compromise central bank independence. They argue the pay cut should only apply to successors of the current governor, Andras Simor, to allay concerns that the bill is intended to pressure current management. Adding to these fears will be the fact that the ruling Fidesz party has called for Mr Simor’s resignation. Read more
The ECB has given a dressing down to the Hungarian government over plans to cut central bank salaries – and for failing to give the ECB enough notice to scrutinise the bill. A precedent was set a week ago, when the ECB scolded Romania for cutting its central bank staff salaries.
Two-thirds of the ECB’s strongly worded legal opinion reminded the Hungarian government about good time-keeping. The consulting authority, reads the document, may flag an issue as ‘urgent’ but “even in such cases a minimum one-month deadline applies”. Hungary apparently allowed less than three weeks for the process. The section ends: “The ECB would appreciate the Ministry for the National Economy giving due consideration to honouring its obligation to consult the ECB in the future.” Read more
Irish unemployment rose to 13.3 per cent in May, the highest rise among the 30 countries reported by Eurostat in its monthly unemployment bulletin. The previous rate, in April, was 12.9 per cent.
Hungarians, by contrast, recorded the greatest drop in unemployed, with 10.4 per cent, down from 10.9 per cent last month. Overall, six countries reported increasing unemployment, 10 recorded falling unemployment, and 14 remained static. Latvia, Spain and Estonia are still at the top of the European league with almost one in five of their labur force out of work, although two of these have not yet recorded up-to-date May figures. Read more
If rumour is true, things are looking up for the 100,000 Hungarians more than 90 days past their mortgage due date. What’s left of Hungary’s international loan may end up in a mortgage-relief fund, intended to allow people to rent their homes, reports Reuters.
The new fund – reported in daily Magyar Hirlap and not yet confirmed by officials - would buy property (that would otherwise stand to be repossessed) from commercial banks, allowing mortgage-holders to rent the property. The paper also said that the bad loans of households would be replaced by state loans, though it did not name a source. Read more
The European Central Bank is being worryingly opaque – even by its own standards – about the enhanced role it is playing across Europe, including beyond the eurozone’s eastern border. It is now an open secret in financial markets that the ECB has established currency swap arrangements with the Polish and Hungarian central banks, making it easier for its counterparts in Warsaw and Budapest to provide euros locally. Yet, if you ask the ECB, it refuses to comment.
Such behaviour seems bizarre – and could be counter-productive. Read more
Romania and Hungary cut interest rates to record lows on Monday as central bankers looked to support growth following improved investor risk perception in central and eastern Europe.
The National Bank of Romania lowered its monetary policy rate from 7 per cent to 6.5 per cent, while the Magyar Nemzeti Bank in Budapest trimmed the base rate from 5.75 per cent to 5.5 per cent, the lowest since the fall of communism.
Romanian and Hungarian currencies have strengthened in recent weeks and it has become cheaper to insure against the risk of their debt defaulting, as investors bet that eastern Europe is gradually overcoming the worst of the financial crisis. Greek banks hold significant assets in Romania, but so far contagion risks appear benign. Read more
Eurozone and EU-wide unemployment have stayed at their record December highs of 9.9 and 9.5 per cent, respectively.
Looking at the by-country data is instructive. With inflation data released at the end of last week, we thought a Phillips curve might be in order: Read more
The Hungarian central bank governor has cut the base rate from 6 to 5.75 per cent, effective today. The move was expected, and a further cut is seen as likely before easing stops. Rates were last cut 25bp on January 25.
Hungarians will be borrowing more forints and less euros under one of several new initiatives planned by the country’s central bank.
Interest rates are typically higher on forint-denominated mortgages than, for instance, their euro counterparts. But spreads have been narrowing and the central bank plans to reduce them further. The Magyar Nemzeti Bank will buy forint-denominated mortgage notes up to a maximum face value of 100bn forint ($500m). Read more
Hungary’s central bank decided today to lower its base rate by 25 basis points to 6 per cent. The decision was in line with market expectations and weighed brightening inflation prospects against external risks such as Greek and Irish debt. The rate was also cut by 25bp in December. The new overnight central bank deposit rate is 5 per cent and overnight collateralised loan rate is 7 per cent.