| BUDAPEST, March 1
BUDAPEST, March 1 Prime Minister Viktor Orban is
expected to nominate the man he calls his "right hand" to head
Hungary's central bank on Friday, a move that could prompt cheap
money being pumped into the economy ahead of elections in 2014.
Orban, who has often been at loggerheads with the European
Union, banks and the International Monetary Fund, is widely seen
as appointing Economy Minister Gyorgy Matolcsy, one of his
closest allies, to replace hawkish Governor Andras Simor, whose
six-year mandate is expiring.
Such a move would ensure Orban's influence on the National
Bank of Hungary even beyond next year's elections, as the new
governor will stay for six years.
Matolcsy has been the frontrunner for the job. He is the
mastermind behind most of Budapest's experimental economic
policies - including Europe's biggest bank tax and a huge
private pension takeover - that have at times upset the EU, IMF
and investors in the past three years.
Orban could yet surprise and nominate someone else - he
likes to finalise his decisions at the very last moment - but
markets and local media widely expect Matolcsy to swap his
current government spot for the top job at the bank.
To replace Matolcsy as economy minister, Orban is expected
to nominate Mihaly Varga, another close ally and a former
finance minister whom investors see as a market-friendly.
With Matolcsy, a new, looser era could start at the central
"A broad range of measures could enter the policy mix going
forward," said Mujtaba Rahman, an analyst at Eurasia Group.
"Not only are we looking at lower interest rates and a
weaker equilibrium exchange rate but the use of foreign exchange
reserves and even (an asset-buying) type manoeuvre cannot be
Investors would be watching closely to see whether Matolcsy
will proceed with caution or launch new measures that some may
see as risky to the volatile forint currency.
Facing elections, Orban, whose party has lost about half of
its public support since the 2010 vote, needs to show
crisis-weary Hungarian voters that the economy is finally moving
out of the doldrums, after a recession last year.
"I have an idea what a good central bank governor is like,
and how the central bank and the Hungarian economy could perform
better if appropriate personal decisions are taken," Orban told
private news channel HirTV on Monday without naming his choice.
Besides Simor, one of his vice governors, Ferenc Karvalits
will also leave the bank at the end of March. It is not clear at
this stage whether Orban will also name his successor on Friday.
Under the law, Orban can also pick a third deputy governor
to Matolcsy but in that case in order to comply with the law,
parliament will also need to appoint a new external member to
the Monetary Council. Then the size of the rate-setting panel
would expand to the maximum 9 members allowed by law.