FRANKFURT — A fight over the top job at the central bank is pitting the two big beasts of Slovak politics against each other, setting the stage for turbulent months ahead.
Prime Minister Robert Fico is trying to force out the current governor of the National Bank of Slovakia, Peter Kažimír, and install his current finance minister, Ladislav Kamenický, four people familiar with the matter told POLITICO. However, Kažimír, supported by President Peter Pellegrini and his ruling coalition Hlas party, is clinging to the position — despite a recent and controversial conviction for bribery.
The struggle forms the backdrop to crucial negotiations this fall over how to reduce the second-worst budget deficit in the eurozone and avoid EU sanctions. It will be a key test of Fico’s political skills and Slovakia’s credibility in the financial markets.
The task would be hard enough on its own, but is being complicated by a bitter personal feud between Kažimír and Fico. The prime minister considers Kažimír a “traitor” for having fragmented his Smer party five years ago together with Pellegrini.
Kamenický and representatives for Smer did not reply to a request for comment.
In a statement to POLITICO Kažimír stressed his ongoing commitment to his role, noting he was “fully dedicated to leading and developing the National Bank of Slovakia.” He added that his post offered him “a unique opportunity to strengthen trust in an institution that is essential and irreplaceable for our country.”
The incumbent
Although Kažimír’s term as governor officially ended on June 1, he has kept his powers due to a 2016 law that says the sitting governor can remain in office until a successor is appointed.
Fico wants him out, but Hlas — a party founded by Pellegrini, Kažimír and other dissidents from Smer in 2020 and which is now Smer’s coalition partner — continues to back Kažimír, calling him “the most qualified choice from a professional standpoint.”
Hlas also claims that the current coalition agreement gives it the right to name the next governor, who also sits on the Governing Council of the European Central Bank.
Fico is banking on the stigma of a bribery conviction, handed down to Kažimír just before his term ended, eventually forcing Hlas to drop its support for him. A judge found that while Kažimír was finance minister in 2016, he offered a bribe to a tax official to hasten the tax audits of companies owned by an acquaintance. The judge sentenced him to pay a €200,000 fine or serve a year in prison.
Kažimír has always maintained his innocence and has called the charges politically motivated, noting in a recent op-ed that the judge had offered him immunity if he gave the authorities anything on Fico or Pellegrini to build a case against them.
He is currently appealing to the Supreme Court, which is expected to rule within a year, according to six people POLITICO contacted who were granted anonymity to speak freely about sensitive legal and political issues.
The court ruling has caused some awkwardness for central bank employees, who dislike the optics of working for a convicted criminal, three people who personally know Kažimír said. But, they added, Kažimír’s reputation as “a good manager” who has worked hard to modernize the institution has also offset some of that stigma.
“[Even] people who never voted for Smer and who are really embarrassed by the conviction would like him to stay, because as a governor he’s much better than Kamenický,” said one of them, a former member of parliament.
Old grudges run deep
The roots of the struggle date back seven years to a time when Fico’s third administration was falling apart following the murder of a journalist who had been investigating potential ties between the government and the ‘ndrangheta mafia from Calabria, a region in southwest Italy. Kažimír at the time enjoyed a reputation in European policy circles for the tough attitude he had shown as finance minister from 2012 to 2019 toward Greece’s requests for a bailout amid its sovereign debt crisis.
In order to secure his future, Kažimír struck a gentleman’s agreement with then-National Bank Governor Jozef Makúch to give the latter a second term at the central bank on the condition Makúch would make way for Kažimír before the 2020 elections, which Smer was on course to lose, two former officials from the Slovak central bank told POLITICO.
The position of governor is the highest-paid public-sector role in the country and until then had been reserved for technocrats. EU law also makes it virtually impossible for a government to remove the central bank governor.
After Smer suffered a debacle in the 2020 Slovak parliamentary election, finishing second with 18.3 percent and being swept from government, a group of Smer parliamentarians followed Pellegrini in quitting the party to form Hlas. While Fico saw Kažimír’s fingerprints all over the rift, the former member of parliament told POLITICO Kažimír had not played an active role. “He was like the strategic [person] in the background. You know, the advisor.”
The deadlock may endure for some time, however. With Smer still the largest party in the current parliament, Kažimír’s bid for reappointment is unlikely to win parliamentary approval. At the same time, Fico is unlikely to push for Kamenický to replace him until the budget for next year is adopted, four people familiar with the matter said.
Smer has been polling behind opposition liberal party Progressive Slovakia for nearly a year, and will have to spread the pain of deficit reduction adroitly to stand any chance of extending its hold on power.
Meanwhile, doubts abound concerning Kamenický’s fitness for the role — and not just related to his proximity to Fico.
“He is not really interested in public finance or central banking. He prefers to paint,” said one of the former central bank officials in a nod to the minister’s passion for the visual arts.
The two parties could conceivably strike a deal to help smooth budget negotiations, three of the people said. But such horse-trading has already trashed the bank’s reputation, one complained.
“This was never the case in the past,” the former official said. “It’s the first time Slovakia experiences something like this.”
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