Julia Kiraly, a deputy governor of Hungary's central bank, said on Monday she was resigning in protest at changes the new governor has implemented which, she said, could damage the bank and the Hungarian economy.
The resignation of such a senior official is likely to sharpen concerns among some in the market that the central bank can no longer act as a brake on policies pushed through by Prime Minister Viktor Orban, who has clashed repeatedly with the European Union and international lenders.
In a resignation letter sent to the Hungarian president, Kiraly said she was stepping down from all her central bank posts "to signal the seriousness of the situation" at the bank since Gyorgy Matolcsy, an Orban ally, became governor last month.
She said she believed the bank's Monetary Council had been undermined by Matolcsy's decision to reshuffle the staff which supports it, and to reduce the time council members have to review proposals.
She also said in her view changes in how the bank communicates, including the cancellation of conferences and press briefings after interest rate decisions, could lead to a deterioration of the bank's assessment.
"Decisions have been made that could cause serious damage not only to the National Bank of Hungary but in the longer term also to the Hungarian economy," Kiraly wrote in the letter, copies of which were distributed to journalists.
"Taking all of this into account, I can see an increasing likelihood that decisions could be made that are not well-founded, and (which are) mistaken, for which I do not wish to take any responsibility."
She said in the letter that she was resigning from both her post as deputy governor, and her seat on the Monetary Council. The resignation would take effect from April 22, or earlier if a replacement is appointed before then, her letter said.
Orban has been criticised by the International Monetary Fund, by Brussels, and by some investors for implementing policies which are aimed at pulling Hungary out of recession but which, his critics say, carry a high risk of destabilising markets.
Until Matolcsy's appointment, the central bank was seen by investors as a strong, independent institution capable of offsetting the most high-risk government policies.
But since he took over at the bank, Matolcsy, previously Orban's economy minister, has fired some of the bank's most respected economists and put his own associates into crucial roles.
Kiraly is the only one of the Monetary Council's eight members not appointed by Orban or his Fidesz party. Her six-year mandate would have expired in July.
There were already signs of a rupture between her and the bank's new management last week, when she said she had been given only 35 minutes to read a 40-page document on the bank's new stimulus plan before being required to debate and vote on the measure. She said it was not enough time to properly consider the document.
