Hungary's government has pushed through a law to undermine the independence of the central bank

Hungary's government has pushed through a law to undermine the independence of the central bank. The clear intention is to force down central Europe's highest interest rates, even though the politicisation of monetary policy runs contrary to the principles of the euro zone – which Hungary is obliged to join. Yet it is unlikely to cause the country any more problems in its tortuous progress towards adopting the single currency. The National Bank of Hungary (NBH, the central bank) said on November 24th it would challenge in the Constitutional Court a law passed by parliament to dilute the NBH's independence. Currently, the governor of the NBH and three deputy governors sit on the interest rate-setting Monetary Council; 3-5 other members are nominated by the governor and named by the state president with the approval of the prime minister. Under the new law, approved on November 22nd, two deputy governors will lose their place on the Monetary Council, the governor will have the right to nominate four other members and the president will directly appoint the remainder (3-5). Because the government has backed away from dismissing any of the deputy governors immediately, all three will remain until their mandates expire in 2007. However, the government (formally the president) will have the right to appoint up to four members immediately. Assuming that this happens, the Monetary Council could have 13 members until 2007, when the number would fall to 11.