Incoming Irish Central Bank chief caught up in New Zealand controversy

Opposition calls for Gabriel Makhlouf and finance minister to resign over budget leaks

 

Newly appointed governor of the Central Bank of Ireland, Gabriel Makhlouf, is under mounting pressure to resign in his final weeks as head of the New Zealand Treasury.

Mr Makhlouf (52) is at the centre of a controversy involving leaked budget details which has been building since Tuesday, when he claimed his department had evidence it was the subject of a deliberate and systematic hack. The department suffered 2,000 attacks on its system within 48 hours, he said.

The police, who were called in to investigate, now say there is no evidence of illegal activity, and they have indicated that the department’s web search tool was used to access the embargoed information.

The most vocal demands for Mr Makhlouf’s resignation come from the leader of the New Zealand opposition National Party, Simon Bridges, who called the secretary of the treasury’s position “untenable,” alleging a cover-up at the department “to hide . . . incompetence”. New Zealand’s finance minister, Grant Robertson, said he was “disappointed” in the treasury, but stopped short of calling for resignations.

The National Party confirmed its responsibility for obtaining the budget information, and defended its public release as important evidence of government failure.

Egyptian-born Mr Makhlouf moved to New Zealand to join the treasury in 2010 as deputy chief. In 2011 he was promoted to head the department. Before working in New Zealand he held posts in the UK civil service and the OECD.

He is due to take up his new position at the Central Bank in September, making him the first overseas official to fill the post in the institution’s 76-year history. He will succeed Philip Lane, who is moving to a post with the European Central Bank next month.

A spokeswoman for the Minister for Finance Paschal Donohoe said the controversy would not affect Mr Makhlouf’s appointment as governor of the Central Bank of Ireland, adding that it was a “matter for the New Zealand treasury” to deal with.

Political furore

The political furore over the hacking allegations has dominated New Zealand news for days, and all but eclipsed Thursday’s official budget release. Ministers from the Labour-led coalition government accused the National Party of lying and acting illegally.

The National Party’s Mr Bridges responded by calling Mr Robertson, “a desperate man,” and said he too should resign. The finance minister said he intends to remain in his job.

Hours before Thursday’s full budget release, Mr Bridges revealed how his party obtained the budget information. He said National Party researchers stumbled across it as they combed treasury’s website, using the search function to find details of previous budgets to use as a benchmark. At a press conference, Mr Bridges showed video of the searches conducted using key phrases including “2019/2020.”

In an update statement on Thursday, the New Zealand treasury said it developed a “clone of its website” in preparation for the budget. Information was added to this as each budget document was finalised and while the clone site was not publically accessible, some of the information contained on it was available through search results on the live site.

The treasury said it has taken steps to increase its security and has also called in the state services commissioner, responsible for the oversight of the civil service, to conduct an inquiry.

The leaked details of the so-called Wellbeing budget included broad figures for spending in areas like defence and did not appear to distort markets.

This year’s budget was already controversial because it is underpinned by a new effort by treasury to move beyond GDP and financial indicators to measure national progress.

In February, the department revealed it had placed monetary values on facets of social wellbeing including friendship and good neighbours. The effort was criticised by the National party, which accused Treasury of importing irrelevant international economic measurement to New Zealand.