Hungary?s Government Quarrels with Central Bank over Debt Figures

By Veronika Gulyas

The National Bank of Hungary and the country?s government Monday fell out publicly over the country?s public debt statistics, just days after the government opened the way toward taking control over the central bank.

The dispute began when the central bank said on Monday Hungary?s official public debt figure, measured in line with European Union rules for current and aspiring members of the euro zone, came to 82.6% of economic output at the end of the third quarter. The level is above the 60% ceiling for EU member states.

The government called the debt tally ?unprofessional.?

Gabriella Selmeczi, a spokeswoman for the governing Fidesz party, said the central bank was comparing ?apples with pears? because gross domestic product is measured in the country?s currency, the forint, while a significant part of public debt is foreign-currency denominated.

?The National Bank of Hungary?s comments on the matter are not professionally based, and don?t serve the country?s interests to the least extent,? Ms. Selmeczi said.

?The central bank has for years been calculating public debt based on the European Union methodology,? the press office of the central bank told WSJ Emerging Europe.

Ms. Selmeczi said foreign-currency trading has been very hectic recently due to the euro crisis, which is why public debt should be calculated ?independently,? because ?this is the only way the economy?s true fundamentals will show.?

The central bank is obliged to carry out calculations in line with the criteria laid out in the Maastricht Treaty, the 1992 agreement that sets convergence criteria for EU members. Currency exchange rate fluctuations can?t be ignored in debt tallies.

It was the first time that any Hungarian government criticized the central bank?s methodology so openly. It is also the government?s first fallout with the central bank in 2012.

Since election victory in 2010, the ruling camp has often been at odds with the central bank Governor, Andras Simor. On Dec. 30, Hungary?s parliament, where the governing party has a sweeping majority, passed a much-disputed Central Bank Act, increasing in the number of people on the bank?s interest-rate setting board and opening the possibility for merging the central bank with the country?s financial regulator and demoting the central bank governor. The forint plunged sharply against the euro after the bill was passed.

Source: http://blogs.wsj.com/emergingeurope/2012/01/02/hungary%E2%80%99s-government-quarrels-with-central-bank-over-debt-figures/?mod=WSJBlog

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