New Czech central bank head faces political row

Tuma, a tennis and skiing fan, joined the CNB board in February 1999. He previously served as the chief economist at Prague-based investment house Patria Finance from 1995-98, before joining the European Bank for Reconstruction and Development as a director. Analysts said the appointment of Tuma will cheer markets since the former investment banker is not seen as beholden to any political party. "I think it is a situation where the central bank functions well and therefore I don't think that a mere change at the highest post will lead to any basic change in the central bank's approach or behaviour," said one analyst.

Still, Tuma faces opposition from Premier Milos Zeman, who criticised him for making comments deemed overly hawkish by the cabinet. Zeman was not consulted prior to the appointment.Last week Tuma said the central bank (CNB) may tighten interest rates in the coming months due to stronger-than-expected economic growth - though exchange rate strength must be taken into account.Zeman countered at the time that such statements should disqualify Tuma from becoming governor and reiterated his distaste for the choice at a news conference after the announcement. "The president with this takes full accountability for the decision which could lead to a worsening of the development of the Czech economy," Zeman said.

Tuma also faces the wrath of opposition leader Vaclav Klaus who has been trying to force through legislation that will take the power of naming the central bank governor out of the president's hands and give it to cabinet as well as forcing the CNB to consult with the government on some targets. Havel rushed to name Tuma before the legislation could affect the process. After last week's Senate election, which saw Zeman's and Klaus's parties fail in their bid to take a two-thirds Senate majority that would allow them to override the president's veto of the laws, the changes appear to be doomed.

Shortly after, Czech finance minister Pavel Mertlik said he regretted that Presdient Vaclav Havel in selecting new members for the central bank's board ignored the opinions of CNB governor Josef Tosovsky, Premier Milos Zeman, and his own. He said that while he regarded all new members of the board as having the necessary knowledge and experience, he was not content with the political engagement of Michaela Erbenova.

Mertlik is convinced that people on the central bank's board should be politically independent which not all the new members are. "I have especially in mind Micheala Ebernova who is certainly a good economist but is a one-time adviser to Mr Klaus, member of his team when he was prime minister, and also former adviser to ex-finance minister Ivan Pilip," Mertlik told reporters.

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The following are short profiles of newly-chosen Czech central bank governor Zdenek Tuma and board members Michaela Erbenova and Jan Frait.

Zdenek Tuma, 40 years-old

Graduated from the Economic University in Prague and went to work for the prognostication institute, an economic think tank of the communist era. In 1993 he was adviser to the industry and Trade Minister and in 1995 he became the head economist at Prague brokerage Patria Finance.From June 1998 until he became a member of the central bank board in February 1999, he represented the Czech Republic, Slovakia, Hungary and Croatia on the board of directors of the European Bank for Reconstruction and Development. On February 13, 1999, was named a vice-governor of the central bank. Has studied at the London School of Economics, the Timbergen Institute (in the Netherlands) and George Mason University (U.S.).

Michaela Erbenova, 32 years-old

An economist at Komercni Banka, she has done stints as a visiting doctoral student at Princeton University's Economics department and was a visiting fellow at the Harvard Institute for International Development. Has also worked as a consultant to the OECD in Paris. In 1996 and 1997 worked as adviser to Czech Prime Minsiter Vaclav Klaus and as chief adviser to Finance Minister Ivan Pilip from 1997 to 1998. She has been with Komercni Banka since November 1998 and held the position of Director of Investor Relations before being named to the central bank board. Has a PH.D. in economics from the CERGE institute of the Charles University in Prague.

Jan Frait, 35 years-old

A professor of monetary economy at the College of Mining and Metallurgy in Ostrava, north Moravia. His current research, coordinated with the central bank, focuses on the impact of capital flows on the monetary policy and on inflation forecasting. In 1995 was awarded the "Young Economist of the Year" from the Czech Economics Society for his research in modelling the Czech Republic's balance of payments.