Rusnok named new governor of Czech National Bank

Former interim prime minister Jiří Rusnok was named as new governor of the Czech National Bank on Wednesday at Prague Castle. Rusnok, an economist who also served as finance minister and minister of industry and trade and is a friend of President Miloš Zeman, will begin his six-year mandate in July. While a revolution is not expected, the new governor will have to oversee an eventual exit from the low crown policy introduced two-and-a-half years ago.

Jiří Rusnok, Miloš Zeman, photo: CTK

President Miloš Zeman had praise for both Jiří Rusnok and outgoing governor Miroslav Singer at Prague Castle on Wednesday, thanking both men for their services. Rusnok has long been a key associate of the president and was handpicked for the post of interim prime minister after the fall of the Nečas government. The head of state said on Wednesday that that Mr Rusnok’s extensive experience in both the private sector and in government was a key asset.

“As a result, there could be clearer communication between the national bank with the president, the government, experts and the public. I reject the argument that closer communication with the president in any way affects the independence of the central bank; on the contrary I think that greater communication will only raise the bank’s prestige.”

Czech National Bank, photo: Štěpánka Budková

The president added that he knew that differences of opinion lay ahead but he stressed that for him “expertise and experience” were more important than simply “parroting” his views. Mr Rusnok, despite close ties to Mr Zeman, has been described in the media as his own man, one who was not against currency intervention to keep the crown low.

That policy and those interventions, described now as the legacy of the outgoing Miroslav Singer, will eventually have to be lifted. Jan Skopeček, an economist at Prague’s University of Economics and advisor to the centre-right Civic Democratic Party, told Czech TV the timing of the move will be tricky.

“I would like to hear how the new governor foresees a departure from the rather unconventional forex interventions; it is not just about the weakening of the crown now but a matter of lifting of the measures so that the effect on the exchange rate is not dramatic. Another question is that of negative interest rates, which I think is very dangerous policy; some members of the central bank board have spoken about; those are questions I think Mr Rusnok should address.”

Negative interest rates mean that the depositor pays the bank rather than the other way around.

Jan Skopeček, photo: archive of ODS

It is no secret that President Zeman strongly opposed the forex interventions which have held the crown to around 27 crowns to the euro, not least because of his initial push for the Czech Republic to adopt the European currency sooner rather than later; reports, however, suggest that following the crisis in the euro zone those pro-euro sentiments have somewhat cooled. As for a lifting of the current measures, mid-2017 has been mentioned as an earliest possible date.