September 9, 2019 / 1:01 PM / 6 days ago

Hungary central bank chief criticizes finance minister for downbeat comments

BUDAPEST (Reuters) - Hungarian Central Bank Governor Gyorgy Matolcsy criticized the finance minister on Monday for recent comments that suggested the economy’s “golden age” was nearing an end due to an expected slowdown.

FILE PHOTO: Hungarian Central Bank Governor Gyorgy Matolcsy speaks during a parliamentary committee hearing in Budapest, Hungary, February 26, 2019. REUTERS/Tamas Kaszas

In the first open conflict between Hungary’s two key economic policymakers, Matolcsy said Finance Minister Mihaly Varga was wrong and the golden age would “last for decades”.

The unusually blunt remarks burst the lid on a rivalry between the two men who have been in charge of Hungarian economic policy since 2010, when right-wing Prime Minister Viktor Orban took over from a leftist government.

“Why shouldn’t we question the words of a finance minister if those run counter to the nation’s desires and the plans of the government?” Matolcsy wrote in an article on the website novekedes.hu.

A spokesman for Varga could not immediately be reached for comment.

Asked about the remarks, Orban’s spokesman said: “The Hungarian government and prime minister carefully listen to the central bank governor’s opinion every time but never comment on it.”

Varga told a business conference on Saturday that after years of strong economic growth, the economy appeared to be losing steam, although he added that the global economy was not in a recession because growth in the United States, the European Union and China was “not that bad.”

He said domestic industry looked resilient despite a slowdown in EU powerhouse Germany, Hungary’s key trading partner. He added that the service sector was making a growing contribution to growth, dampening any weakness in industry.

Varga appeared to rebuke a proposal by Matolcsy, made at the same venue two days earlier, in which the Governor called for broad economic stimulus to dampen risks from the slowing world economy. The minister said the best way to tackle a slowdown was to maintain fiscal discipline and market stability.

In his article on Monday, Matolcsy suggested the minister was complacent.

“Shouldn’t we make preparations if the standstill of the German economy does end up affecting us, too?,” Matolcsy wrote. The Governor also criticized Varga’s remarks that Hungary needed a stable and predictable exchange rate.

The forint EURHUF=D3 hit a new record low below 330 versus the euro in late August.

“What would constitute a stable exchange rate according to the minister? 330/320/310 or 300 forints/euro, or perhaps 240 forints/euro as in the spring of 2008?” Matolcsy wrote, reiterating that the central bank had no exchange rate target.

Zoltan Torok, an analyst at Raiffeisen Bank’s Hungarian unit, however, did not assign any special significance to the bout, saying: “This is just a storm in a teacup.”

Reporting by Krisztina Than and Gergely Szakacs; Editing by Kevin Liffey, Hugh Lawson and Peter Graff

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