Zdenek Tuma to be the new central bank governor

The Czech media claim that President Vaclav Havel has selected Zdenek Tuma as the new governor of the Czech National Bank. Will his choice spark another conflict between Havel and the leaders of the strongest political parties? Vladimir Tax tries to find the answer:

It seems that Zdenek Tuma, the present vice-governor, is to succeed the outgoing governor, Josef Tosovsky, who resigned at the beginning of November after 11 years in office. Although seemingly quiet and inconspicuous, Tosovosky was one of the main figures who shaped the Czech economy during its transition from a communist centrally planned economy to a free market. He has even been described as the man who actually held the reins of the Czech economy. At the same time, the Czech National Bank has enjoyed absolute independence in deciding its policies, without being forced to coordinate or at least consult its steps with the government.

This, of course, sparked a number of controversies between the central bank, represented by Mr. Tosovsky, and successive governments. The former Prime Minister Vaclav Klaus even blamed Mr. Tosovsky for causing the economic slump which began in 1997, by putting the brake on a promising acceleration in the economy. The bank itself claimed the economy was overheating, and there is a wide consensus among economists that the policies of Vaclav Klaus's governments were far from ideal. The problems played a role in the collapse of Vaclav Klaus's government in late 1997, after which Josef Tosovsky was installed as interim prime minister.

Another aspect, often criticised by Vaclav Klaus and some other politicians, was that the Czech president had a free hand in selecting members of the central bank's board and appointing the governor.

The constant clashes resulted in an effort to limit the Czech National Bank's independence by a new law which was passed due to cooperation between the ruling Social Democrats and Mr Klaus's main opposition Civic Democratic Party. The law, which comes into effect in January 2001, introduces parliamentary control over part of the bank's budget, coordination of its policies with the government and above all, the president would merely approve the cabinet's suggestion for a new central bank governor.

While some of the changes are seen as reasonable, especially the coordination of economic policies between the bank and the government, some commentators claim others are nothing more than Mr Klaus's personal revenge against President Havel and the central bank for spoiling his economic miracle. It is therefore no surprise that President Havel hurried to select a new governor before the controversial law comes in force.

Both Prime Minister Milos Zeman and opposition leader Vaclav Klaus have already expressed their disapproval with the selection of Zdenek Tuma. But that seems to be the only thing they can actually do about it.