CNB battle near end

The battle for the independence of the Czech National Bank is reaching an end. It is the central bank that looks like the loser as the lower house of the Czech parliament passed a new law that reduces the bank's independence despite the fact that some of the changes are at odds with the Czech Constitution and EU legislation. Vladimir Tax has the details.

After lengthy disputes, the Chamber of Deputies has finally passed a law on the Czech National Bank. Originally, the law threatened to significantly reduce the Central Bank's independence but experts say the final version was a good compromise. The law newly gives the government control over appointing the bank's board members, introduces supervision by the Supreme State Inspection Authority, forces the bank to consult the government before making certain policy decisions and also puts a ceiling on salaries of the bank's top managers. However, the most controversial point is the division of the Central Bank's budget into two parts - operational and investment, while the parliament has assumed the power to decide on the investment part of the budget.

The Czech National Bank welcomed some of the changes, and said the most serious limitations of its independence were not approved by parliament. However, it says the European Commission might protest against the parliamentary control over the Central Bank's budget.

While the Central Bank is relatively content with the result of the parliamentary debate, analysts consider the law as a step in the wrong direction which could complicate the country's accession to the EU. That is despite assurances from the authors of some of the ammendments - the Civic Democrats of former Prime Minister Vaclav Klaus - that the changes are designed to bring Czech legislation in harmony with that of the EU. Economic analyst Petr Zahradnik of the Conseq Finance company doubts that the intentions of the Civic Democrats were really pro-European. The law on the Czech National Bank now goes to the upper house of Parliament, the Senate, which can correct some of the problems. If not, it is still possible to appeal to the Constitutional Court.