Decision Time for World's Longest-Serving Central Bank Boss
(Bloomberg) -- It’s nearing time for Mugur Isarescu to decide whether he’ll prolong his more than quarter-century tenure as the longest-serving central bank boss in the world right now.
The 69-year-old governor of the National Bank of Romania has lived through everything from hyperinflation and his country being on the brink of bankruptcy to the global financial crisis of 2008. What he does when his current term ends in October could owe a lot to the perilous state of central-bank independence in the age of populism.
Romania, a country of 20 million people, is providing the latest headache for European Union officials already struggling to cope with threats to democratic standards elsewhere in the bloc’s ex-communist east. Hungary and Poland already have interest-rate-setting panels stacked with government allies. Isarescu may be more inclined to leave if there’s a similar threat to Romania’s board, where all members are up for reappointment or replacement.
“If the current leadership is replaced by poorly qualified political loyalists, then yields for Romanian bonds will likely increase and the leu will probably come under renewed pressure,” said Blaise Antin, the Los Angeles-based head of emerging-market sovereign research at TCW Group Inc., a longtime holder of Romanian government debt. “I fear that if it’s not Isarescu, it will be someone less credible and less influential.”
For Romania, it’s not a good time for such upheaval. After rapid growth, the economy is set to slow, while the budget deficit is on course to blast beyond EU limits next year and the current-account gap is the widest since 2008. With presidential and parliamentary elections both due by end 2020, the need for a steady hand is clear.
Isarescu is certainly that. He played a key role in Romania’s accession to the European Union in 2007 and has been an anchor of stability as multiple governments have collapsed. Under his stewardship of the economy, hyperinflation was defeated and growth has helped ease poverty. The next milestone would be euro adoption, a goal recently set for 2024.
Isarescu also has international clout. He’s collaborated with counterparts from Alan Greenspan to Mario Draghi during his tenure, received 17 honorary university degrees and is a member of the Bilderberg Group, an exclusive global policy club.
But Isarescu’s authority has been challenged. He’s complained that the government failed to consult him on everything from tax cuts to the surprise imposition of a “greed tax” on banks -- the first measure stoking inflation and the second triggering the biggest stock selloff in a decade.
While in previous years, a gentleman’s agreement between the main parties in parliament allowed the central bank to maintain a diverse and balanced line-up on its board, the opposition says that this time round, the ruling Social Democrats want full control. The party says it will address the central bank after this month’s European Parliament elections.
Some of Isarescu’s colleagues have already said they’ll leave. Deputy governor Liviu Voinea is taking a job at the International Monetary Fund in Washington, while non-executive board member Agnes Nagy will let another candidate join the race, according to the leader of the ethnic Hungarian party, which supported her.
So far, the governor is keeping his cards close to his chest, teasing reporters with hints that his age is weighing on his decision. He may even seek reappointment for a shorter term.
“I’m almost 70 years, aren’t I?” he asked reporters a year ago, saying he couldn’t go on. When asked again in January, however, he simply said that “parliament will decide” and “what really matters is the strength of this institution.”
(Updates with central bankers dropping out of election race in 10th paragraph.)
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