Former prime minister Jiří Rusnok appointed to the central bank board

Jiří Rusnok, photo: Filip Jandourek, ČRo

Czech President Miloš Zeman on Wednesday appointed former prime minister Jiří Rusnok to the board of the Czech National Bank. It is the first of five appointments the president is due to make to the central bank board during his term in office and commentators say the changes may have a moderating effect on the bank’s currently Eurosceptic board.

Jiří Rusnok, photo: Filip Jandourek
Jiří Rusnok, a 53-year old economist and former finance minister, is set to join the central bank’s seven member board on March 1, replacing current board member Eva Zamrazilová whose six-year mandate on the board will end in February. His appointment comes as the bank faces mounting criticism from some politicians and economists for its decision to launch forex interventions to weaken the crown.

The move, in November last year, to avert the threat of deflation and help Czech exports, has won the central bank governor Miroslav Singer the 2014 Central European Banker award but has elicited scent praise on the home front. Some politicians and economist say it was unnecessary and that by increasing the price of imported goods, among them basic consumer products, the bank is curbing domestic spending and stifling economic growth.

Public trust in the bank slipped from 66 percent to 31 in the wake of the move, and a CVVM poll indicates that 64 percent of Czechs are critical of the decision. Only 12 percent of respondents said they understood and approved of the interventions.

Mr. Rusnok, who headed an interim cabinet at the time when the bank announced its decision, voiced his approval of the move and publicly supported the bank’s policy. With interventions likely to continue until 2015 at least, Jiří Rusnok is unlikely to rock the boat on that front. However commentators predict that he may gradually soften the bank’s eurosceptic outlook, especially if future changes-of-guard on the board bring in newcomers who are more open to the EU. This appears to be extremely likely since the board’s present set-up reflects the Eurosceptic outlook of the former Czech president Václav Klaus. His successor Miloš Zeman, who hoisted the EU flag at Prague Castle as soon as he took office, is determined to affect a U-turn, making greater openness to the EU one of his top priorities.

A significant factor in this transformation process is the scheduled change of guard at the head of the central bank with governor Miroslav Singer’s mandate due to expire in the summer of 2016. Even now Rusnok, a close ally of the president’s, is being tipped as a likely successor to Singer. Mr. Rusnok is refusing to speculate on that possibility and while his stand to the EU is clearly more forthcoming than that of the present bank board, the former prime minister remains cautious in his predictions. In a recent interview he said the Czech public needed to get rid of “prejudices” against the Eurozone, adding however that joining the single currency block would not be realistic before 2020. This is the sort of distant time-frame that Mr. Singer himself would have little problem confirming.