Romania’s National Bank (BNR) governor Mugur Isarescu faces mounting pressure from the ruling coalition after the recent depreciation of the Romanian currency RON against the euro.
Daniel Zamfir, a senator of the Alliance of Liberals and Democrats (ALDE), PSD’s junior coalition partner, announced on Wednesday that he would summon Isarescu again to answer before the Parliament’s specialty committees after the governor declined the first invitation to hearings. Zamfir, who is a known adversary of the central bank’s leadership, said Isarescu will be requested to come to the parliament on February 6, “either he likes it or not”.
Meanwhile, members of the main coalition party, the Social Democratic Party (PSD), have launched an unprecedented attack on the central bank governor. Serban Nicolae, the leader of the PSD group in the Senate, said that the BNR governor’s unjustified refusal to come to hearings in the Parliament should determine his immediate dismissal.
The ruling coalition is blaming BNR for not defending the local currency against the recent depreciation. The EUR/RON exchange rate went up as much as 2% in January, from 4.6639 at the end of December 2017 to an all-time high of 4.7648 on January 25. The Finance Ministry and the Social Democratic Party (PSD) both issued statements last week, saying that it was the central bank’s job to defend the exchange rate’s stability and that BNR should use the EUR 36 billion foreign exchange reserve to do this.
Tensions between the Government and PSD on one side and BNR on the other side started at the end of last year when the Government adopted an emergency ordinance that levies a so-called “tax on greed” upon local banks. The tax, which applies to local banks’ financial assets, has a variable rate depending on the level of interbank exchange rates ROBOR. Central bank governor Mugur Isarescu openly criticized this initiative, calling it a “bomb” that is difficult to understand and a “mischief”. He said that the new tax negative impacts the flexibility and efficiency of monetary policies and won’t help the Government.
The tax on financial assets placed the central bank in an uncomfortable position, as one of its tools for defending the exchange rate against past speculative attacks was increasing the short-term exchange rates and draining the liquidity from the money market. Such a move, in the new context, would bring higher taxes for local banks, affecting the banking system’s stability.
However, PSD blames the central bank for lack of action. Moreover, ALDE senator Daniel Zamfir accused BNR of manipulating the exchange rates and interbank rates.
BNR dismissed the accusations through the voices of its spokesman Dan Suciu and governor advisor Adrian Vasilescu.
On Wednesday, the leader of PSD’s organization in Alba county, Ioan Dirzu, accused Mugur Isarescu of taking revenge on his party and destroying the local economy. He also accused the central bank governor of increasing the interbank rate ROBOR and exchange rate to blackmail the Parliament into giving him another mandate at BNR’s helm. Dirzu said that Isarescu must be dismissed at once and investigated for treason. While the PSD Alba leader is not one of the party’s strongest voices, his attack against Isarescu shows that PSD is determined to put an end to the BNR governor’s career of almost 30 years at the helm of Romania’s monetary institution.
The names of Florin Georgescu, BNR’s first deputy governor, and Darius Valcov, prime minister Viorica Dancila’s economic advisor and PSD’s main economic strategist, have been vehicle lately as possible successors for Isarescu.
Commenting on Valcov’s possible appointment as BNR Governor, BNR spokesman Dan Suciu said “there are hundreds of specialists in this bank who deserve professional management. If he can provide this, there’s nothing to say,” according to Mediafax.
Isarescu's current mandate as BNR governor ends in September.
(Photo source: BNR.ro)