ECB slams Romania over central bank pay cuts

6th July 2010, Comments 0 comments

The European Central Bank, which urges countries to curb deficits and backs wage moderation, has reprimanded Romania for cutting central bank staff pay by 25 percent, a spokesman said on Tuesday.

In a letter published on Monday, an ECB's opinion on the Romanian decision stressed the Romanian National Bank's (BNR) independence and said: "No third party should be able to exercise direct or indirect influence" over it.

A direct transfer of savings from the measure to the Romanian state "can be assimilated to monetary financing which is clearly prohibited under Article 123 of the Treaty" on the Functioning of the European Union, the ECB added.

Another test over central bank pay could occur in Hungary, where ministers have submitted a bill which would cut the pay of central bank governor Andras Simor to about 8,550 dollars (6,800 euros) a month, one quarter of its current level, the Financial Times reported on Tuesday.

Simor is also under pressure to resign over former offshore investments, the FT said.

Neither Hungary or Romania is a member of the eurozone but each is planning to join the 16-nation bloc, and Romania is currently trying to reach a deficit target of 6.8 percent of output agreed with the International Monetary Fund.

The ECB has called several times for governments to curb soaring deficits and for wage moderation, but framed its response to Bucharest on the principle of the central bank's independence.

It recalled Romania's "obligation to ensure that any amendment to the legislative provisions relating to the determination of the remuneration of the employees of BNR is decided in cooperation with BNR, taking due account of the views of BNR."

ECB president Jean-Claude Trichet has also battled for his own bank's independence from political influence, a position called into question when the ECB decided in May to begin buying debt issued by eurozone member states.

Trichet's own annual pay increased by 2.5 percent in 2009 to 360,612 euros, according to the bank's annual report.

© 2010 AFP

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