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Apr 28, 2016

Prime Minister Orban backs central bank governor over use of funds

The Hungarian National Bank said that all contracts had been concluded lawfully and no funds had been squandered

Prime Minister Viktor Orban has voiced his support for central bank governor, György Matolcsy, saying he unequivocally backed him despite calls for him to step down over the use of bank funds.

The move came following the revelation, in an emailed response to Reuters on Wednesday, that the Hungarian National Bank (HNB) said all of the foundations' contracts had been concluded lawfully and no funds had been squandered.

Matolcsy has come under fire from the Együtt party over the activities of six educational foundations set up in 2014 by the central bank in what was seen as his own personal project.

The foundations have received nearly 1 billion euros of central bank funding, investing most of the money in Hungarian Government bonds, whose income pays their running costs.

After a court ruling forced the foundations to publish details of hundreds of contracts, Együtt asked prosecutors to investigate an unnamed individual on suspicion of mishandling public funds in media content deals. It later called for Matolcsy to resign.

It said the bodies had boosted the value of their assets by 830 million HUF. It added that the foundations were now separate legal entities that operated independently of the bank.

The affair has become a test of transparency and of the political association between Orbán and Matolcsy, an ally, which has been key to the direction of Hungary's economic policies.

Orban was robust in his defense of Matolcsy when asked by Nepszabadsag whether his confidence in his ally had been shaken by the allegations.

"Heaven and earth would have to collide for that to happen," Orban, who had previously called Matolcsy his "right hand," told the newspaper.