At the “out there” end of the spectrum, we have the use of space imagery to map heat islands in our cities (see “Hungarian Architects Using Space Tech to Reduce Carbon Emissions”). More likely to be filed under “mundane,” but no less important for all that, parliament passed the imaginatively named ESG Act at the tail end of last year (see “Change Ahead on Corporate Loans: Banks to Screen for Sustainability Risks”). Between those two points, you’ll find that most bases are covered.
Even the National Bank of Hungary has got in on the act. In truth, that is not so surprising, for the MNB has been carving out quite a niche for itself as a pioneer of green financing among European central banks. It has won a lot of praise in the course of that, something it seems it can no longer expect from the government. When Prime Minister Viktor Orbán returned to power in 2010, he appointed György Matolcsy as his Minister of National Economy, and at one point even called him his “right hand.” There was little surprise when Orbán named Matolcsy as the next governor of the MNB in March 2013. According to international news wire Reuters, Orbán told Hungarian public radio at the time: “Some of the tools needed for economic growth are government tools that the Economy Minister uses, while other tools are at the central bank, its governor and the Monetary Council. These must be in some form of harmony for a country to perform well.”
For the vast majority of the time since 2013, that harmony was apparent. Matolcsy talked positively about the “fairytale” that was Hungarian economic growth and delighted in snatching “unorthodox” policy instruments from the MNB’s toolbox; bank and cabinet marched in seeming lockstep. But since last year, the tension in the relationship has been palpable. Matolcsy has, at times, appeared to criticize government policy. In response, cabinet figures have complained the central bank is not doing enough to support economic growth and has kept its base rate too high for too long, none more so than the current national economy minister, Márton Nagy. These two have history: Nagy was a deputy governor under Matolcsy for five years until the former unexpectedly resigned to become Orbán’s chief economic advisor in May 2020.
Nagy delivered the latest broadside against Matolcsy at an AmCham Business Forum on Feb. 1 (see “Domestic Consumption, Labor, and FDI: 3 Pillars to Support Growth”). The minister said monetary policy could offer support but complained that “[monetary] easing is behind other central banks.” Nagy argued that holding the central bank rate at 10% “does not support economic recovery,” adding that he did not know what lay behind that decision. “You would have to ask the MNB, which is independent.”
Matolcsy is into his second six-year term as governor, and if all else is equal, will remain in post until March 2025 (there is a two-term limit for the governor). “Be in harmony, yet be different,” the Chinese philosopher Confucius is supposed to have once said. It’s easier to imagine the second part of that sentence right now than the first.
Robin Marshall
Editor-in-chief
This editorial was first published in the Budapest Business Journal print issue of February 9, 2024.
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