Controversy surrounds appointment of new central bank governor

President Havel's nomination of a new governor of the Czech National Bank has created fresh controversy on the Czech political scene. The prime minister, who is firmly opposed to the president's choice, has refused to counter-sign the appointment, and is threatening to challenge the move in the Constitutional Court. It is the first serious controversy within the executive of the Czech Republic, and legal experts are divided as to the possible outcome of a protracted legal battle. Daniela Lazarova has the story:

The man at the centre of the controversy is the central bank's former vice-governor, Zdenek Tuma. Economists say he is the man for the job, but the two strongest political parties in the land, the governing Social Democrats and their power-sharing allies, the Civic Democrats, have rejected him. When, a few weeks ago, Tuma said he would be prepared to raise interest rates to curb inflation, the prime minister issued an open challenge, calling Tuma "a disaster for the economy" and saying he should drop out of the running as a potential candidate for the post of governor of the Czech National Bank.

However, the controversy goes beyond Tuma's professional reputation. Some time ago the Social and Civic Democrats convinced both houses of Parliament to vote for a law that would take the power of naming the central bank governor out of the president's hands and give it to the Cabinet. President Havel, who opposed the law, appointed the new governor just 48 hours before the new legislation was due to go into effect, ostensibly snubbing the Cabinet.

Although differences between the prime minister and president had bubbled under the surface for months, the ugly scrap over the appointment appears to have shocked even the outgoing governor, Josef Tosovsky, who himself had put forward Tuma's name as a possible successor. "Political consensus is vital for this post," Tosovsky pointed out. "Since he did not have it, Tuma would have been better advised to turn down the offer."

Legal experts are divided as to whether a counter-signature is essential for the governor's appointment. "This section of the law can be interpreted in two ways," says Deputy Prime Minister Pavel Rychetsky. In 1993, then-Prime Minister Vaclav Klaus was criticised for counter-signing the appointments of the central bank's governor and board, on the grounds that the prime minister's signature undermined the central bank's independence. A counter-signature also appears on some later appointments and dismissals but certainly not on all of them. The discrepancy never became an issue since all preceding appointments were reached by political consensus.

Now, both parties say they're certain of their rights. Experts say the Court's decision could swing either way. Whatever the outcome of this dispute, it is the economy which stands to lose most. The crown fell in late afternoon trading just hours after the dispute flared up. Political analysts say a protracted court battle would not only weaken the crown but damage the country's reputation abroad.