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UPDATE 1-Hungary president blocks disputed central bank law change
March 9, 2016 / 2:30 PM / 2 years ago

UPDATE 1-Hungary president blocks disputed central bank law change

(Adds details, analyst)

By Krisztina Than and Gergely Szakacs

BUDAPEST, March 9 (Reuters) - Hungarian President Janos Ader on Wednesday blocked an amendment to the central bank law that curbs the transparency of finances of business units of the bank, in a rare show of defiance from a close ally of Prime Minister Viktor Orban.

Ader’s rejection of the controversial law is a blow to the central bank’s powerful governor, Gyorgy Matolcsy, whose loyalty to Orban is beyond doubt.

Matolcsy, whom Orban has described as his “right hand” and Hungary’s “most creative economist,” has fully supported Orban’s policies to boost the economy with sharp interest rate cuts and billions of euros of cheap loans to banks.

Fidesz last week pushed a bill through parliament limiting public access to financial data of companies owned by the National Bank and its foundations, ignoring critics who said it was violating the constitution.

However, Ader, whom the ruling Fidesz party’s parliament majority elected in 2012, sent the legislation to the Constitutional Court for review in a surprise move, after some Fidesz lawmakers also criticised it.

“Having examined the legislation, I have found that the changes are not in line with the constitutional provisions on the handling of public funds and on the freedom of public information,” Ader said in a statement on his website.

Ader added that the retroactive effect of the changes in the amended legislation was probably also in breach of constitutional principles.

A former parliament speaker, Ader has been described as a trustworthy and reserved career politician. He is a lawyer who has held key posts in Fidesz and has been close to Orban since Fidesz’s early days in 1988.

Ader, who has the right to send laws back to parliament or to the constitutional court for review, has used this right only in very few cases in the past four years.

The central bank has set up six educational foundations, granting them about 245 billion forints ($870 million) in 2014. It also partly or wholly owns business units such as the Budapest Stock Exchange where it bought a majority stake last November.

The new law says these foundations were now fully controlled by their curators, and so their assets no longer qualified as public. It allows for the data of business units partially or wholly owned by the central bank to be classified for up to 10 years if releasing it is deemed to harm the bank’s monetary or foreign exchange policy interests.

“Ader may be a loyal servant of the system but there are cases when even he makes decisions against the government’s will. This is such a case, although not the first one,” said Peter Kreko, director of think tank Political Capital.

“Ader quite simply had to refer this to the Constitutional Court if he wanted to take his office seriously because the bill brought up serious constitutional concerns.”

A central bank spokesman could not be reached for comment.

Last week, after lawmakers passed the changes, it said “transparency and control over the central bank’s operations are ensured.” ($1 = 282.08 forints) (Additional reporting by Marton Dunai; Editing by Hugh Lawson)

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