Hungary proposes new changes to central bank law

(BUDAPEST) - Hungary proposed new amendments on Thursday to a central bank law that was heavily criticised for allowing undue political interference, in yet another bid to secure a 15-billion-euro bailout.

Economy Minister Gyorgy Matolcsy submitted the new changes to parliament to respond to some of the criticism voiced by the European Union, the International Monetary Fund and the European Central Bank.

Budapest on Monday withdrew a previous set of amendments after the EU and IMF said they did too little to ensure Hungary's MNB central bank was free from political interference.

Under the new changes, published on the parliament's website, members of the MNB's monetary council will have more possibilities of appeal in the event of being fired.

In addition, meetings of the rate-setting council will not be attended by a member of government, as was foreseen under previous amendments.

On the other hand, the council will still grow to nine members, from a current seven, and parliament will get to name the two additional members as well as a third deputy to the central bank governor, a measure already criticised by the ECB.

These latest measures will only come into force in 2013, after the mandate of the present governor Andras Simor, with whom the government has been at odds, expires.

Debate on the new amendments is to begin next Monday, with Matolcsy saying he hoped the law could be put to a vote on July 2.

The central bank law has been at the heart of a long-standing dispute between Hungary and the EU and IMF, hampering talks over a crucial credit line of 15 billion euros ($20 billion).

Thursday's move was well received by analysts.

"There is a strong chance of success this time," Mariann Trippon, an analyst with CIB bank, told AFP.

"This version includes all the points raised by international institutions," she said.

Simor also welcomed the new amendments, noting in a statement: "The Hungarian government accepted all the proposals from the international institutions that had been raised during earlier talks as conditions to the start of formal negotiations (on the credit line)."

Budapest hopes to begin formal talks with the IMF and EU in mid-July, but these could prove tough, with the IMF criticising key parts of Prime Minister Viktor Orban's economic programme.