Gyorgy Kopits’s outlash harmful for the interests of Hungary

„A discredited person criticizes the Hungarian central bank in the international press

Gyorgy Kopits, a former member of the National Bank of Hungary’s Monetary Policy Council has urged action from international financial markets and the European Union against Hungary. Mr. Kopits heavily criticized Hungary, and the operations of the central bank in particular, in the editorial section of the Wall Street Journal on March 27.

American readers may not be familiar with Mr. Kopits’s career in Budapest. He was a member of the Monetary Policy Council of the National Bank of Hungary between 2004 and 2009. He received the request to fill that post from Zsigmond Jarai, who was finance minister in the first government of the current Prime Minister Viktor Orban, who Mr. Kopits furiously criticized in his article, and then was appointed by the same government to the post of central bank governor.

Mr. Kopits held his position in the Monetary Policy Council, the top decision-making body of the central bank, in a period when lending in foreign currencies was on the rise. Foreign currency loans continue to place a major burden on tens of thousands of Hungarian families and firms to the very day. The National Bank of Hungary is among those that are now making efforts to mitigate the damages, to lower the impact.

Gyorgy Kopits’s criticism of the central bank—while it harms the prestige of the independent central bank—also lacks credibility. As the president of the Fiscal Council, Mr. Kopits approved Hungary’s 2010 budget, in which revenues were significantly over- and expenditures underestimated. Without immediate measures, the budget deficit of the 2010 budget would have been above 7% of gross domestic product as against the originally planned 3.8% of GDP viewed as attainable by Mr. Kopits.

The operations of the National Bank of Hungary are lawful and transparent. The new central bank’s management under the leadership of [new central bank governor] Gyorgy Matolcsy replaced the essentially one-person management system with a system based on a broader foundation in March. Turnover in the central bank’s staff, including managers and subordinates, was less than 4%. That means that essentially the same people work at the Hungarian central bank as before. Not the changes in central bank positions but rather the malicious writings similar to that of Mr. Kopits, which are not supported by facts but are unfounded, are posing a threat to the authority and the professionalism of the central bank.”

An edited version of Balog's letter appeared in Wall Street Journal