Europe's Worst Central Banker
Polish central bank Governor Marek Belka has been caught on tape asking a government official to dismiss the finance minister, in return for engineering an economic rebound to help the government win re-election. If he doesn't resign, the government should fire him.
Poland's Wprostmagazine last week published transcripts of a July 2013 conversation between Belka and Polish Interior Minister Bartlomiej Sienkiewicz, in which Belka effectively asks for the ouster of Jacek Rostowski, the finance minister at the time. Although media attention has focused on some salacious comments the governor made about one of his fellow Monetary Policy Council members, it's the besmirching of the independence of his office that makes Belka's position untenable.
The implication is that Belka would have been unwilling to rescue a slowing economy if he didn't get his way. The idea of a central banker blackmailing the elected representatives in government, using monetary policy as a weapon or bribe, is unacceptable, as is the idea that the governor might favor one political party over another.
The central bank's decision to keep Polish interest rates at a record low of 2.5 percent since July 2013 may be judicious and appropriate, and have nothing to do with ensuring the current government retains office in elections scheduled for 2015. And Rostowski's subsequent dismissal in November may have been a coincidence, unrelated to Belka's demands. But Belka's recorded comments cast doubts that can't be easily dismissed.
Belka says he's not stepping down, claiming he hasn't broken any laws and the conversation was a private matter talking about a hypothetical situation. So far, the Polish government has reacted as most regimes do -- by raidingthe offices of the magazine and launching an investigation into whether the laws about privacy have been broken. Prime Minister Donald Tusk has conceded that he may have to hold a snap election in response to the debacle, which at least suggests he understands the seriousness of the situation; investors have reacted by selling the zloty, which has had its worst weekly drop since March.
The scandal comes at a time when the world's central banks are amassing more and more power, taking explicit responsibility for ensuring the safety of the banking system as well as guiding asset prices through direct market intervention. Central bank independence has to be sacrosanct, and has to be seen that way. Belka's fellow central bankers should have a quiet word and persuade him to go.
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