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Hungary defers central bank merger until 2013

Merger of the Hungarian central Bank with regulatory authority will not take place until the current central bank governor Andras Simor's mandate expires in 2013, said Hungary's Prime Minister Viktor Orban.

Meanwhile, the Hungarian parliament has adopted the new central bank law, which increases the government’s influence over monetary policy despite criticism by the European Union and International Monetary Fund (IMF).

Hungarian prime minister Viktor Orban refused to back down, arguing that it had met most requirements of the European Central Bank (ECB). The disagreement is at a time when Hungary is seeking a possible bailout worth between $20bn -$25bn from the EU and IMF.

The bank said the new bill creates the possibility for influence over its decision-making based on government and party interests, which is against the basic treaty of the European Union.

The law expands the central bank’s rate-setting monetary council to nine people from seven, with the two additional nominees to be appointed by the parliament. The number of deputy governors will also increase from two to three.

National Bank of Hungary said in a statement that the changes can endanger the stability of the Hungarian economy and therefore gravely damage their national interests.