ADVERTISEMENT

Ireland Stands by Its Central Bank Outsider – For Now

Ireland Stands by Its Central Bank Outsider – For Now

(Bloomberg) -- Go inside the global economy with Stephanie Flanders in her new podcast, Stephanomics. Subscribe via Pocket Cast or iTunes.

Ireland’s government is standing by its choice to run the country’s central bank -- for now -- as he finds himself at the center of a political dispute in another country.

New Zealand Treasury Secretary Gabriel Makhlouf, slated to become Ireland’s first overseas central bank head in September, is embroiled in controversy over how secret budget material became public, with two investigations into the affair underway.

Ireland’s finance ministry has so far refused to comment on what it describes as a “political matter in New Zealand.” Speaking privately, two people familiar with the matter say Makhlouf’s position is not under threat for the moment. A third said Ireland could yet drop him if inquiries uncover serious wrongdoing.

The episode began late last month when New Zealand’s opposition National Party revealed details of budget spending days before the official release. Makhlouf claimed Treasury’s systems had been “deliberately and systematically hacked” and called in the police.

Not Unlawful

Treasury later said police had advised it that the accessing of the information “does not appear to be unlawful.” The department said that in preparing for the budget, it had loaded information onto a clone website. While the site wasn’t publicly accessible, a “specifically-worded search” could surface a small amount of content.

The National Party called for both Finance Minister Grant Robertson and Makhlouf to resign, saying they wrongly accused it of criminally hacking budget information. This week, New Zealand’s State Services Commission, which oversees government ministries, said it would investigate Makhlouf’s actions and public statements during the episode. At the same time, it noted Makhlouf “believes that at all times he acted in good faith.”

A separate inquiry into the budget breach was launched last week.

Makhlouf won’t comment while he’s the subject of an inquiry, a Treasury spokesman said.

The timing could hardly be worse. About a month before the episode, in a surprise appointment, Makhlouf was tapped to become Irish central bank governor, succeeding Philip Lane, who is moving to the European Central Bank.

Political Pressure

Chief economic and financial adviser to New Zealand’s government, Makhlouf had previously worked in the U.K. civil service where his responsibilities included domestic and international tax and welfare policy issues.

For now, Dublin doesn’t expect the investigations into the affair to turn up anything damning, according to one person familiar, meaning the appointment can safely proceed.

Still, political pressure is starting to build. The government should suspend Makhlouf’s appointment until the outcome of the probes is clear, Joan Burton, finance spokeswoman for the opposition Labour Party, said on Wednesday.

“It took the best part of a decade to get our economy and public confidence back on track,” she said. “We cannot jeopardize that confidence by appointing someone under investigation in another country.”

To contact the reporters on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net;Matthew Brockett in Wellington at mbrockett1@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Brian Swint, Tracy Withers

©2019 Bloomberg L.P.