Month: July 2010

“Place in the sun for the hopes of Hungarians”

This is a loose translation of the title Viktor Orbán gave to his speech at the opening of the New Széchenyi Plan. The original is actually more emphatic. He "demands" a place and since it wouldn't make much sense to demand hopes for Hungarians from Hungarians, I came to the conclusion that this demand is addressed to the outside world. In a way he is not much off target because, after all, the whole New Széchenyi Plan will be financed from European Union subsidies. That is, if they keep coming.

The pamphlet that was published for the occasion is 199 pages long and is available online. On the surface it looks very impressive. One wonders how on earth György Matolcsy's new ministry managed to put together such a detailed pamphlet that is being offered for public discussion. Not enough time has elapsed since the Új Széchenyi Terv was published and therefore as far as I know not much has been written about the plan. But a few barbed pieces have already appeared. One in Népszabadság (July 31) by Gusztáv Megyesi is entitled "Stolen material." Megyesi and others discovered that at the very end of the pamphlet there is a list, a very long list, of people who allegedly "participated in the preparation of this pamphlet." I was astonished to see that a dead man, Árpád Skrabski, was busily helping along. What Andy Vajda, the American-Hungarian film producer, contributed to this economic plan is also a mystery to me. I wasn't surprised to see the name of Zsigmond Járay, but another economist and former national bank chairman, Péter Ákos Bod, was astonished to discover his name on the list. Apparently he had nothing whatsoever to do with it. Others discovered the name of Gergely Litkai, who is a humorist. One can imagine how much fun someone can have with the list.

Much of Viktor Orbán's short speech was not at all new. He repeated some of the themes we already discussed in connection with his speech at Tusnádfürdő. But here are some questionable claims from the speech.

First, Orbán contended that the ruins of the Hungarian economy were cleared away by the 29-point "action plan." In reality, the 29-point action plan was thrown together in three days because José Manuel Barroso poured cold water on Orbán's plans for a higher deficit for the current year. The action plan also had to be introduced in a hurry because the two left-handed Lajos Kósa and Péter Szijjártó frightened the world markets to death by comparing Hungary's situation to that of Greece. The ruins this action plan had to clear away were the Orbán government's own doing. Moreover, although some of the economic steps to be taken were passed by parliament, the bill containing them hasn't even reached the president for his signature. So, if there were ruins, they are still lying about untouched.

Yet, according to Orbán, "the financial situation of the country today is stable and reliable." Miracle of miracles! Two months ago, according to Orbán, the country was close to bankruptcy and the "action plan managed to prevent the danger of collapse." To repeat the obvious, if the action plan hasn't even been introduced, how on earth could it have prevented the alleged collapse? And note that Orbán here supports the blatantly false statements of the two culprits who managed to turn half the world upside down for a couple of days. This is typical Orbán. He says certain things for home consumption and entirely different things abroad. Except, in my opinion, in today's electronically wired world, that will not float for long.

After a few encouraging words about the prospects for economic independence which is now possible because his government "established the international conditions" for it, another claim that is questionable, he turned to a favorite theme he already mentioned in Tusnádfürdő: Hungary must become "a land of knowledge." Because of "the peculiar Hungarian way of thinking  and [their] intellectual talents … [Hungary] can be a winner" in this global economy. But this time when he was speaking to an exclusively Hungarian audience and the president of Romania, Trajan Băsescu, wasn't present as he was in Tasnádfürdő, he went further. He added that "there is a saying in the United States that there are two kinds of intelligence on this earth: that of people in general and another of Hungarians."

His audience must have loved this one. Isn't it heartwarming to hear that one belongs to a nation whose IQ is way above or profoundly different from (and superior to) that of any other people?  By the way, there is no such American saying that extolls the superior intelligence of Hungarians. When it comes to the present Hungarian government, one can read all sorts of things about it but none of them mentions the superior intelligence of its prime minister and his economic advisors. On the contrary.

The New Széchenyi Plan

More than a year ago I devoted a whole post to Count István Széchenyi, "the greatest Hungarian," as his political opponent Lajos Kossuth called him. In it, I said a few words about Viktor Orbán's brainchild, the Széchenyi Plan. I indicated then that the "success" of the Plan was more psychological than anything else. Fidesz is known for its excellent communication techniques. Fidesz politicians appreciate the persuasive powers of Madison Avenue more than most and have never skimped on their advertising budget. As a result, I'll bet, there are few adults in Hungary who haven't heard about the famous Széchenyi Plan which was supposed to make Hungary one of the most prosperous nations in Europe. After Fidesz lost the elections the plan was discontinued.

The real story is slightly less glamorous, at least as related by politicians and economists who are more critical of the first Fidesz government and its accomplishments.

I heard a long interview with István Csillag (SZDSZ), minister in charge of the economy in Péter Medgyessy's government, who, as a successor to György Matolcsy, has all the details of plan number one at his fingertips. After all, he took over the ministry that was in charge of the original Széchenyi Plan. Csillag readily admits that the plan made a positive impact, not so much in economic terms as psychologically. The amount of money handed out was relatively small. Moreover, the funds allocated for disbursement among small- and middle-sized enterprises had been in the system before, but not under one umbrella. Enterprising businessmen could apply for grants, but they had to find their way among various ministries that handled these grants.

So the amount of the money to be disbursed remained the same. What didn't was the amount spent on advertising. While in prior years the ministries spent about 200 million forints on advertising, Matolcsy's ministry spent four billion forints just in the first year of the plan's existence on a massive advertising campaign. This propaganda worked. First, it instilled the illusion of new government largesse. More positively, it raised the self-confidence of smaller Hungarian entrepreneurs who were more willing to try their luck applying for a grant.

At this point Hungary had a budget designed for two years. During this period the government spent about 700 billion forints as part of the Széchenyi Plan. However, only a fraction of this amount actually went to small and middle-sized businesses. Several road construction projects circling larger cities like Pápa and Győr were financed from this fund. Since there was no competition all that money went to one company, Vegyépszer, close to Fidesz's heart. Vegyépszer ended up with a hefty 350 billion forints as a result of work on road construction during this period. It was also from this fund that the widening of the road between Székesfehérvár and Budapest was financed, to the tune of another 50-60 billion. The plan also financed the ever increasing subsidies to the agricultural sector, and that was also a fairly large chunk of change, about 100-150 billion. In brief, out of the 700 billion forints only about 150 billion went to the business sector.

Not even all of that amount went to small businesses. About 40 billion was spent on investments necessary to entice foreign companies to Hungary. From the remaining 110 billion available for small businesses (which amounts to a measly 16% of the plan's grants) tourism was favored; according to Csillag, about 20 billion forints was spent on that sector. However, the amount of money received by individual companies or projects was very small. In the first year about 2,000-3,000 tourism businesses received grants. In the second year this number doubled. Yet the money allocated to tourism remained the same.

However modest its economic impact, the psychological effect of the propaganda campaign was lasting. To this day the Széchenyi Plan has a certain aura about it.

As far as I can see, the New Széchenyi Plan looks like a rerun. No new sources of funding will be available. Fidesz just gave a new name to an already existing program, the New Hungary Development Plan financed by monies coming from Brussels. There might be some reshuffling of projects, but if the Hungarian government wants to use money currently allocated and approved, for example, for a cultural project to, let's say, building a spa, it will have to ask the permission of the European Union to make the change. How charitable the EU will feel toward Hungary in the next few months is hard to tell. Moreover, if Viktor Orbán insists on his own agenda about deficit reduction, the subsidies might not be approved at all.


Viktor Orbán and the “western type of capitalism”

Viktor Orbán, it seems, lovingly embraces inconsistency. There is first of all his inconsistency over time, well documented in József Debreczeni's second book Arcmás, published last year. Debreczeni painstakingly collected important Orbán quotations that show his about-face from radical liberal to radical right-winger. Orbán, by the way, would most likely vehemently deny both labels because he now claims that he and his party are beyond "ideologies."

Of course, one could say that no one can expect absolute consistency over time. Times change, a person's outlook changes. Moreover, we all know that once Orbán realized that on the liberal side of the political spectrum he would always play second fiddle to the well established and weightier SZDSZ leaders, he turned toward the right, especially since with the staggering loss of MDF in 1994 the field was wide open.

But Orbán exhibits not only the inconsistency inherent in changing sides. He also flaunts the rules of logical consistency. He is quite capable of saying in the same speech that the "economy is in ruins and needs total rebuilding" and two sentences later that the country's financial situation is stable.

Particularly interesting to my mind are some of his latest turnabouts and his incoherence. On ideological grounds he was fiercely anti-Russian until about a year ago. This anti-Russian attitude came from a typical Hungarian gut reaction to anything Russian. After all, without Russia Hungary might have won the war of independence of 1848-49 against the Habsburg Empire. The Soviet occupation of Hungary in 1944-45 also left a bitter taste in Hungarian mouths. Everybody knew that without Soviet backing the Hungarian communists couldn't have established a one-party dictatorship. So, on one level his reaction was understandable, but rationally every politician ought to know that it behooves Hungary to establish a cordial relationship with Moscow. Yet Viktor Orbán while prime minister conducted a decidedly anti-Russian foreign policy, and later during the Gyurcsány period he accused the Hungarian prime minister of being too friendly, perhaps even subservient to the Russians.

About a year ago all that changed. By now, it almost seems that a Russian-Hungarian friendship will be the cornerstone of Hungarian foreign policy.

A similar change of heart took place with respect to China. While he was in office he completely neglected China. It was Péter Medgyessy and Ferenc Gyurcsány who made overtures to the world's fast growing economic giant. By now it seems to me that Orbán unabashedly declares the superiority of an economy in which the state has the guiding role. Orbán thinks that the secret of Chinese economic success is the combination of the one-party system and political dictatorship and an economy that is based on market forces but controlled by the state.

Or at least this is what he seemed to suggest in his speech at Tusnádfürdő (Bǎile Tuşnad) in Romania. Every summer Fidesz holds a "free university and student gathering" in Tusnádfürdő. This was the twenty-first such get-together of Hungarian students from Romania and Hungary; they spend a week in this very picturesque little town famous for its spa. Viktor Orbán always attends, and in the past the whole country breathlessly awaited what kind of message he would send back home from Romania. In 2006, for example, it was here that Orbán first talked about the lies of Ferenc Gyurcsány and the illegitimacy of his government. Therefore, in retrospect one suspects that Orbán already had the tape of the Gyurcsány speech in Balatonőszöd in June, although it was released by him only in late September, just before the local elections.

But let's get back to the "crisis of the western type of capitalism." Surely, Orbán considers this the essence of his fairly long speech because this is the title of the speech when it was published on his website. This "crisis" is more than a more severe recession typical of the business cycle; it in fact marks the end of western capitalism. On the other hand, the Chinese economy grows 10% a year. This is not just a temporary financial hiccup but the demise of a capitalist system that has been in place in Europe for "the last 100 or 150 years." Why exactly these numbers, don't ask me. The trouble lies, according to Orbán, in the fact that the "speculative movement of money came to the fore instead of a capitalism based on work and on value."

But there are other problems as well. "The market must not only be effective but it must also be based on morality." Once upon a time "morality originated in faith in God, but as the world changed and enlightenment arrived, instead of belief in God humanity turned to a kind of code of behavior based on religious teachings." Surely, says Orbán, one must return to the kind of morality that existed earlier and which precludes speculation in the market.

In European countries there are signs that governments are rethinking their mode of behavior that led to the "heart attack" of western capitalism. The first recognition is that "ideological questions have been pushed to the background." (Where he gets this from I have no idea. Most likely he stuck this sentence in because it is his hobby horse. If there are no ideological differences, then there is a new order of unity he himself established after the elections.) So one doesn't need ideologies but "the rehabilitation of moral values." European countries have begun to think along these lines, but one must pay attention to and imitate the East.

Why did China and India do so well economically? Surprise! Because "they stuck to certain values." On the other hand, Europe is losing ground, most likely because Europeans abandoned their values which are "rooted in Christianity."  So what are Europeans supposed to do?  "And it is at this point that we arrive at the role of Central Europe. It is perfectly clear that if Europe doesn't want to sink further, then somehow it has to make friends with Christian but not really European territories. Let's speak clearly: I am talking about Russia."  This is quite something. Christian Europe needs Christian Russia to be able to compete with China and India!

And in this great new friendship Central Europe, actually I would call it Eastern Europe but Hungarians don't like that term, will have a pivotal role. The East European countries will be the intermediaries in this new love affair between Western Europe and Russia. He did make a fleeting remark about past experiences when these countries were the victims of the power struggle between Russia and the West, but this time he is not afraid of such an outcome because the "fact that the Russians are Christians will be of enormous importance in this respect." I guess because all the countries are Christian the Russians will not turn against the Christian West or the Christian Eastern Europe. All nonsense, of course.

I really don't know what to say. I'm stunned because this is jibberish. It sometimes sounds like the rantings of a madman.

Literature and politics: Endre Ady (1877-1919)

Endre Ady is one of the most famous Hungarian poets. Literary critics perhaps would place him next to Attila József (1905-1937) in order of greatness. He was born in a God-forsaken village called Érmindszent in Szilágy County (now Adyfalva in Satu Mare County, Romania). Today the village is clearly dying. It has 177 inhabitants; 80 of them are Hungarian, the rest Romanian speaking. In Ady’s days it was a larger village of almost 800 people, divided almost equally between Romanian and Hungarian speakers.

The Ady family was an old noble family, but by the time Endre came along the parents’ economic status was just a notch above the local Romanian and Hungarian peasants. As one can see the family abode was decidedly modest.

So, from early on he knew what backwardness and poverty were and also had an appreciation of his Romanian neighbors. The family was Calvinist (Hungarian Reformed), and thus he attended a Calvinist high school in Zilah (today Zalau, Romania) which in his day was a smallish town of 10,000. Again the population was mixed but here, unlike in Érmindszent, Hungarians were in the majority. After finishing high school he moved on to Debrecen where he studied law, but instead of lawyering he became a journalist. It was in Debrecen that he published his first volume of poetry. After two years in Debrecen he moved on to Nagyvárad (Oradea, Romania) where he found an entirely different atmosphere from that of Debrecen, which he heartily disliked.Ady In his later years in his writings, poetry and prose, Debrecen is always portrayed as the embodiment of provinciality and backwardness. (Debrecen even today is a very conservative town where Lajos Kósa [Fidesz] has been mayor for the last twelve years and will be elected again this fall.) Nagyvárad was an entirely different town. Today Oradea has a population about 250,000, but when Ady moved there it had only 60,000 inhabitants and a very large Jewish population (about 15,000). Nagyvárad in Ady’s day had a lively cultural life and it was here that he met the woman of his life, Adél Brüll (Mrs. Diósi) who actually resided with her husband in Paris but was on a visit to her family in Nagyvárad. From here on Ady visited Paris seven times between 1904 and 1911.

Why did I decide to write about Ady today? Because an internet friend of mine sent me a short newspaper article by Endre Ady written in 1902, that is before he met Adél whom he called Léda, as in Leda and the Swan. So, let’s see what Ady had to say about Jews, Christians, corruption, and nationalism. First, an explanation of the title “Morals of Turan.” Turan is the Middle Persian name for Central Asia, literally meaning “the land of the Tur.” In the 19th and early 20th centuries Turan was primarily an ideological term designating Altaic and Uralic languages. In Hungary people often talk about the “Curse of Turan” (turáni átok) which is the belief that Hungarians have been under the influence of a malicious spell for many centuries. The “curse” manifests itself as inner strife, pessimism, misfortune, and historic catastrophies. For Ady here it meant a Hungary that is not western but Asiatic and therefore not modern and progressive. So surely these morals of Turan are nothing to be proud of.

According to Ady some Catholic papers published a letter from a candidate for parliament who was asking for the votes of the people appealing to “Jewish morals.” In the comments the editors used this phrase to make some antisemitic remarks. Ady explains that Christian morals by themselves don’t really exist. One can speak only of Judeo-Christian morals. And he adds that unfortunately “full blooded Hungarians, the flame of the Hungarian peasantry, didn’t manage to acquire these morals.”

Apparently a member of parliament announced that holding truly clean elections in Hungary is an impossibility. “We can’t really expect the poor citizens to love his country for nothing…. These are the Hungarian gentlemanly morals. So please don’t try to find the answer in Jewish morals. One should look around in the Land of Turan…. Max Harden, with his critical German mind, claims that the Hungarian is the most corrupt nation on the face of the earth. And that we were corrupt in the barbarian period and even today in our half barbarian times.

“If a cultured man were to take a look at the Hungarian election campaign, he would get sick to his stomach. Each election campaign reveals that we don’t have any talent for modern parliamentary life. Each Hungarian election is the bankruptcy of intelligence and maturity. The politicians themselves want it this way, and make sure that it becomes a reality….

“So please don’t talk about Jewish morals. This is a very weak clerical trick. Our Hungarian nation stands at the highest degree of morality….. total immorality.”

Is anyone surprised that Hungarian nationalists hated Ady? And this kind of brutally critical writing is typical of his journalistic activities. I try to imagine what would happen to a journalist today if he said that Hungary was the most corrupt nation on the face of the earth or that they lived in a half barbaric state. I’ll bet the Arrows of Hungarians, if they were not sitting in jail as they do at the moment, would go after him with a few Molotov cocktails.

In any case, the themes are familiar: Jewish morals, Christian virtues, corruption, cynical politicians, lack of talent for modern parliamentary life. Should I continue? It is sometimes worth reading writers from those “halcyon” days that are extolled by so many as the golden age of Hungary.

About István Stumpf, a new judge on the Hungarian Constitutional Court

In a way, I'm glad that Viktor Orbán decided to let members of parliament take a break for a few weeks and that the avalanche of bills has stopped, at least temporarily. Just to get through the Hungarian News Service's daily reports took hours. Since July 23 the traffic has slowed considerably. At last we've arrived at the silly season (or cucumber season in Hungarian). Of course, there are still the reverberations of the failure of the IMF-EU negotiations which may flare up again; even though financial markets traditionally slow down during the summer they don't stop, and who knows what else can happen on the financial front in August.

But for the time being let's spend a little time on István Stumpf, one of the two new judges on the constitutional court. Our new judge did finish law school but he has no legal experience whatsoever. Zsófia Mihancsik, a very talented journalist, jokingly offered herself up as a potential candidate for Viktor Orbán's consideration. After all, she also finished law school but afterwards pursued a journalistic career in addition to translating from the French. István Stumpf simply doesn't qualify for the post, especially since the job description clearly states that the nominee must be either a legal scholar with a higher degree in law and/or a professorship or a practitioner with at least twenty years of hands-on legal experience. Stumpf is neither.

One day I really should sit down and write a short biography of István Stumpf, whom a journalist for Népszabadság called a "teflon politician," a phrase coined to describe Ronald Reagan. I assume because Stump survived every political change and nothing untoward ever seemed to stick. It is worth mentioning that he was always in important positions, partly because he came from modest circumstances. Neither of his parents finished high school, which was definitely a plus in the Kádár regime. He also became a party member, also helpful. Last but not least, he married well. His wife was the daughter of the last minister of the interior of the Kádár regime. This family connection also offered him a certain layer of protection. In any case, he most likely would have made a career for himself even without the change of regime in 1990.

After finishing law school in 1982 he went on to receive another degree in sociology in 1985 while he was a teaching fellow (tanársegéd) in the law school. In 1987 he moved over to the Institute of Social Sciences of the Hungarian Academy of Sciences (today it is called the Political Science Institute). Simultaneously with these activities he was the founder and first director of a special college attached to the law school called the College of Social Sciences that later was named István Bibó College. This was the birthplace of Fidesz. This college, as far as I can figure it out, was a residential college whose members could pursue their special interests and could invite reform-minded guest lecturers. Sometimes the youngsters went too far politically and in such cases Stumpf's father-in-law came in handy.

Eventually the members of the college published a periodical called Századvég (Fin-de-siècle). Since then Századvég expanded its activities and became a research institute and a political think tank with significant media holdings. Stump is its president. By now Stumpf is a rich man. Although it is difficult to tease out the holdings of Századvég and Stump personally, we know that Stump is the owner of several businesses that all deal with commmunication, part owner of a television and radio station as well as the weekly newspaper Heti Válasz. He often shows up on radio and television stations as an independent political commentator, which is quite a feat considering that for four years, between 1998 and 2002, he was the all-mighty chief of staff (with the rank of minister) of the prime minister's office with over 500 employees. His job was to assist Viktor Orbán govern and help him win the next election. As we know, he didn't win in 2002. In the last eight years the relationship between the two men has had its ups and downs. Several times Stumpf criticized Orbán's strategy openly, in writing. After the 2006 election, when Orbán again lost, he was one of those people within Fidesz who thought that perhaps someone else should take over the reins of the party.

Stumpf changed his mind in 2008 after the successful referendum that pretty well guaranteed that the socialists couldn't win the 2010 elections. He started saying complimentary things about his former student and later boss. Yet Orbán didn't turn to him again and didn't give him a political role. According to rumors Stumpf was offered and refused the ambassadorship to Washington. Then Orbán asked Stumpf to be part of a six-person panel that will come up with a framework for the new constitution. And now finally, he was named judge on the constitutional court without any legal experience, theoretical or otherwise.

There are reams of criticism about the appointment and about István Stumpf who accepted the job knowing full well that he is not qualified. But perhaps the most hard-hitting was published on July 24 in Népszabadság by Szabolcs Kerék-Bárczy, former managing director of MDF. Kerék-Bárczy and Stumpf have known each other for a long time. The Századvég Foundation helped Kerék-Bárczy spend two years at Harvard's Kennedy School of Government where he received a master's degree in public administration. Once Stumpf became minister he hired Kerék-Bárczy to run the office. Well, it couldn't have been a happy time for Kerék-Bárczy because he left his position after a year. He left because he discovered that "the essence and most fundamental goal of the Orbán government was the unscrupulous, 'creative' handling of the law and the money of the taxpayers. In this activity the prime minister as well as his chief minister had the role of initiators and executors…. Fidesz's aim was the creation of its own oligarchic system. It was to this end that it created an ideology, it used faith and religion, national feelings and all instruments that can be found in governance."

Strong words, but Kerék-Bárczy goes even further. He accuses Stumpf of not telling the truth when he talked about his time spent in the United States thanks to an IREX scholarship. I'm familiar with IREX, which was established in 1968 to promote the exchange of students and scholars between the East European countries and the United States. Recipients didn't have to attend any classes, didn't really have to do any research. They could spend their time any way they wanted. It seems that Stumpf visited classes at the Kennedy School and at George Washington University. He apparently claimed at his hearing that he studied law at Harvard.

He also claimed at the same hearing that there was nothing wrong with his appointment because after all the judges of the U.S. Supreme Court are also appointed on the basis of party affiliation. Well, at this point Kerék-Bárczy was really outraged because comparing the U.S. and Hungarian system of selecting judges is like "comparing not apples to oranges but locomotives to oranges." First of all, says Kerék-Bárczy, in the United States the constitution doesn't specify the kind of professional attainment that is necessary for nomination. Yet it would be unimaginable to nominate someone like Stumpf to be a supreme court judge. Not only does he have no legal background but he also announced not long ago that he would like to change the entire current constitutional system. A man who lies about his background and misleads the members of the parliamentary committee about the American practice of appointing Supreme Court judges is simply not fit for the job, says Kerék-Bárczy. And he asks: "What happened to you, István?"

Well, I have an idea. Lord John Acton (1834-1902) famously said, "power tends to corrupt, and absolute power corrupts absolutely." István Stumpf is part of a group that thinks in terms of unlimited power. And this is the result.

Economy, schmeconomy… The world according to Viktor Orbán by György Lázár

György Lázár, the author of today's post, is a Hungarian-American investor. In the past he was senior consultant for Silicon Valley technology firms, Wells Fargo Bank, and Bank of America in California.

When recently an IMF delegation arrived in Budapest to discuss the sad state of Hungarian finances, they expected that Hungarian officials would be ready and willing to discuss the budget numbers. Prime Minister Viktor Orbán had other things in his mind. He flew to South Africa to watch the World Cup soccer final with his pal, OTP boss and billionaire Mr. Csányi. When he finally met the IMF delegation, he told them that Hungary was about to regain its financial sovereignty, and he wouldn’t let the IMF stick its nose into budget details. The IMF bureaucrats were stunned and left.

His fellow Fidesz party members love Mr. Orbán’s tough talk. They have an absolute majority in the Parliament and prefer fast and simple solutions to complex problems. The older folks always overcomplicate the finance stuff. Mr. Bence Rétvári, a 31-year-old lawyer and Orbán’s junior minister, has suggested a moratorium on foreclosure. He conducted no impact studies and had no consensus with the real-estate industry. Mr. Orbán cannot let greedy bankers foreclose on late mortgages! The Parliament unanimously approved the law which banned all foreclosure in the entire country until April 15, 2011! Some say the moratorium will increase real-estate deflation and result in a cascading collapse of mortgages.

Mr. Antal Rogán, another young turk, suggested the reduction of financial reporting requirements for state owned companies, to “increase transparency”. He probably never heard about “off-balance-sheet-accounting” or about the collapse of Enron. Now in Hungary it is legal (almost mandatory) to hide state company losses. When Mr. György Kopits, a U.S. trained economist and ex-IMF official, protested, Rogán told him he should mind his own business. Ironically Mr. Kopits is supposed to oversee Hungary’s budgets.

When IMF officials asked Mr. György Matolcsy how he will finance the new giant real estate management company which is supposed to purchase foreclosed apartments and lease them back to the very same people who defaulted on their mortgages, he explained that the state will provide guarantees; absolutely no money is needed for this scheme.The IMF reminded him that Fannie Mae and Freddie Mac went bankrupt on similar guarantees. Matolcsy explained that that is a bad American example and noted that Hungary doesn’t need rich American uncles to do this financial exercise.

Mr. Orbán and his loyal team don’t seem to care or understand much about finances; they are experts on political strategy. Mr. Orbán knows that the IMF and the EU badly need a success story and Hungary is still relatively well managed; it could easily be one. He also made a clever fuss about his central bank chief’s astronomical salary. The European Central Bank, the IMF and the EU have all fallen into Orbán’s trap. They are lined up behind Mr. Simor. Now Mr. Orbán calls them the “little bankers club,” protecting each others' salaries. He scored points here. The last thing the overpaid Eurobureaucrats want is to discuss their outrageous salaries. Even the rating agencies, Moody’s and Standard & Poor’s, might make fools of themselves. If they lower Hungary’s rating, Orbán has a good argument that Hungary today has one of the lowest budget deficits in the EU, and in the recent stress test Hungary’s banks came out on the top.

Orbán’s unusual high-wire act might work, but he must avoid Hungary’s debt downgrade to “junk”. This is easier said than done, because the debt is currently under review and the other shoe can drop at any moment. A sovereign debt downgrade, with a run on the forint or on the banks will probably finish his government.

In the meantime he assured his fans that his decisions are not based on ideology, but on "common sense". He also introduced his new political slogan, "National Centrum." In a TV interview he confessed that he personally came up with the phrase.

Attacks on the constitutional order in Hungary

The legal watchdogs Transparency International, Helsinki Committee, Hungarian Civil Liberties Union, and Károly Eötvös Intézet found serious problems with some of the new pieces of legislation that, in their opinion, undermine the very essence of democracy–the institution of checks and balances without which democracy can't exist. That is quite explicitly stated in the French Declaration of the Rights of Man and of the Citizen. According to the critics of the parliamentary activities of the Orbán government, a great number of the bills passed and sent on for the signature of the president violate this fundamental principle of the democratic system.

They singled out five bills that they found especially worrisome. First is the selection of the judges of the constitutional court. Until now half of the members of the committee entrusted with nominating judges came from the government party or parties and the other half from the ranks of the opposition parties. That was a democratic practice that should have ensured, in theory at least, a balanced constitutional court. It would have worked if there had been any willingness to compromise, but the committee was more often than not deadlocked. Thus, very often instead of eleven judges there were only nine, as was the case until yesterday.

The new bill changed the composition of the nominating committee. From here on it will reflect the power sharing in the house; the government party, by virtue of having the majority of the seats in parliament, will always have a larger representation on the nominating committee. As things stand now, two-thirds of its members are delegated by Fidesz-KDNP and one-third come from the three opposition parties. In practice, the nomination this year for the two new judges went something like this. The chairman of Fidesz, Viktor Orbán, suggested two names to the Fidesz parliamentary delegation. Not surprisingly, the members of the delegation were overjoyed when they heard the names of István Stumpf and Mihály Bihari and unanimously submitted these two names to the nominating committee. And in that body, there was no question that Fidesz with its two-thirds majority would vote for them. Once they approved these two names, the nominations went to the full house. Here a two-thirds majority is necessary for the election of judges. No sweat.

The second bill they found troublesome was changing the nominating procedure for the two vice-chairmen of Gazdasági Versenyhivatal, the office in charge of ensuring equal opportunity in business competition. Up until now the prime minister nominated the vice chairmen on the recommendation of the current chairman, and the president appointed them to the post. The chairman of GVH has been in office ever since 1998 and will be retiring this year. But his two vice-chairmen still have six more years to go. That would mean that Viktor Orbán would be able to get rid of the chairman, but he is stuck with his deputies who were nominated on the chairman's recommendation. And surely, Orbán wants them out of the way. So the new bill changed the nominating procedure: from here on the designated but not finally approved chairman could name his own deputies. In brief, the two vice-chairmen would be kicked out and Orbán's choice would name entirely new deputies. Well, that was too much even for László Sólyom who sent the bill not back to parliament but straight to the constitutional court. We will see what the new constitutional court will do with it. Until now it usually deferred to Sólyom, but will it do the same when he is no longer president of the republic?

The third complaint is the bill that changed the tenure and status of the Országos Választási Bizottság (National Election Committee). Until now the composition of the OVB changed only every four years, before each national election. Thus the current members were elected in the spring of 2010 and were supposed to serve for four years.  But Orbán didn't like the current members and wanted to get rid of them, in part because he can't quite forgive them for delaying the official poll closings until very late at night and therefore his much awaited victory celebration was not in prime time. (The OVB decided to wait with the final word because in one of the polling places voting was extended because of very a large crowd.) According to the new regulations the composition of the committee must change not only before national elections but before local elections as well. Again, it looks very much as if the bill was introduced solely to oust the current members whom Orbán doesn't like. The law is rewritten by individual whim and thus creates legal uncertainties. Because surely it makes little sense in the long run to have two elections every fourth year, one in the spring and one in the fall, each with its own election committee. Unless, of course, they change the constitution in this respect as well and local elections will not take place in the year that national elections are held.

The fourth problem is the decision that civil servants can be dismissed without providing any reason for dismissal. The decision cannot be questioned or appealed. According to the critics this new law makes civil servants totally subservient to their superiors, subject to acts of retribution, and thus it endangers the democratic functioning of the state apparatus. In brief, from here on civil servants are not covered by the provisions of accepted labor laws.

And finally, there is the law that limits the the size of retirement packages. Or to be more precise, one can have a huge package that was worked out earlier but on anything over two million forints the recipient must pay a whopping 98% tax. The real problem with this particular provision is that it is retroactive. And that in legal practice is more than unusual. It is unconstitutional. The bill deprives the individual of a right earlier granted and enjoyed retroactively. Although the Orbán government tried to change the constitution in order to make this new bill acceptable, apparently the "fix" doesn't remedy the basic problem because it doesn't cover other constitutional guarantees that the bill violates.

There is no question that most of these bills will end up on the table of the judges of the constitutional court. If Sólyom or Schmitt don't turn to the court, the parties, trade unions, individuals will. And that will be the real test. What will the newly reconstituted constitutional court do? Most people fear that the majority of the judges will be willing pawns of Viktor Orbán.

Report of legal watchdogs: Serious problems with the Hungarian parliament’s activities

Four organizations involved with the law and human rights just published a report on the work of the new parliament. Three of the four are Hungarian branches of international organizations: Transparency International, TASZ or the Hungarian Civil Liberties Union, and the Helsinki Committee. The fourth is a strictly Hungarian organization called Károly Eötvös Institute established in 2003 with the help of the Soros Foundation. Károly Eötvös (1844-1916) was a politician and lawyer whose name is associated with the infamous Tiszaeszlár case (1882-83) in which he successfully defended a Jewish community falsely accused of murdering a young girl and using her blood for ritual purposes. I gave the links because each web site has an English version; for those not familiar with the Tiszaeszlár case Wikipedia offers a decent account.

Before I begin a summary of the report I should explain once again some of the intricacies of Hungarian parliamentary rules. Most of the time a bill is prepared and presented by the government. That usually takes months of work by the appropriate ministry. During the preparation of the bill the ministry by law must consult with groups that will be affected if the bill is passed. Normally experts are also consulted and their opinions can be scrutinized by members of parliament. So, it is a long and arduous affair. On the other hand, there is something called "bills proposed by individual members" that dispenses with all these compulsory stages of preparation. This "institution" was adopted to enable the opposition parties to take part in the legislative work of parliament. However, the practice is not restricted to members of the opposition, and in the last three months Fidesz has made extensive use of it. Of the 56 bills only 11 were proposed by the government, all the rest by individual Fidesz-KDNP members.

These bills were not the brilliant ideas of individual parliamentarians. Behind the flood of individual proposals was most likely a group of people who have been working furiously on various subjects that the party and Viktor Orbán found important. It was too much, too fast. Often these proposals were poorly prepared. Some of them had spelling and grammatical errors. Often there were internal discrepancies; sometimes important items were left out. In any case, most of them evidenced haste and carelessness. Equal speed was dictated by the speaker of the house, and thus there wasn't enough time to catch even the bigger problems with these bills. It often happened that the proposal was presented on Friday afternoon, on Monday morning it was discussed in committee and voted on without much discussion, and in the afternoon the bill was put to the floor for general discussion which they also closed on the same day. The result of this clever move was that no proposal for any modification could be suggested. Tuesday they scheduled the "detailed discussion." Usually there are only two sessions of parliament a week, and thus the following Monday the final vote was held. Even changes to the constitution were introduced and voted on in this manner.

As a result the public has been in the dark about the details of the proposed bills although some of them will have serious repercussions when it comes to the everyday life of citizens or the workings of Hungarian democracy. But nothing stopped the newly elected parliament with its huge Fidesz-KDNP majority. On average, bills were pushed through in nineteen days from the submission of a proposal to the final vote, but ten proposals were accepted within a week–that is, in two or three sessions. There were also bills that needed only one day to pass from start to finish. Within ten weeks parliament changed the constitution six times.

The result of this frenetic schedule was that it was almost impossible to follow the work of parliament. The justifications that accompanied the bills were neither detailed nor convincing. In important pieces of legislation, like the media law, justifications for certain proposals were summarized in single sentences. The justification for decreasing government subsidies to parties was simply that it was necessary to fulfill one of the goals outlined in the 29-point "action plan" introduced by Viktor Orbán in a great hurry after the Kósa-Szijjártó-Varga debacle that sent the forint plunging.

According to the legal experts of our watchdog organizations even bills proposed by the government were not prepared according to the rules and regulations currently on the books. For example, if the government wants to change the status of state employees, it will have to negotiate with the representatives of the employees. The ministry must also post the proposal on its web site and invite comments and suggestions. Of course, with this breakneck pace there was no time for such formalities. There was also no time to ascertain whether these new bills conformed to European Union laws. In fact, several observers have already predicted that the Orbán government might have to appear before the European Court because there was at least one occasion on which it knowingly violated EU dictates–namely, lowering the salary of the Hungarian National Bank's chairman, vice-chairmen, and the members of its Monetary Council. And most likely there will be others.

The first part of the report criticizes the way in which bills were prepared and passed. As is clear from this summary, the employees of these organizations found the whole process unsatisfactory and in certain cases illegal. But the substantive criticism is reserved for "the elimination of basic guarantees of a constitutional state." I will leave the discussion of this more weighty subject for tomorrow.

The end of democracy?

Many people think so in liberal circles. There is a serious fear that the current government party's relentless legislative activity, primarily aimed at transferring power to the current government, could put an end to the checks and balances that would limit the dictatorial tendencies of Viktor Orbán and his coterie. The signs of such plans are numerous. In fifty-six days Fidesz managed for all intents and purposes to take over all the so-called independent institutions that would provide a counterbalance to the overwhelming majority of the government party in parliament. Practically everything was put in the hands of the all-powerful Viktor Orbán. He was the one who picked the president of the republic, his own former deputy in the party; he was the one who chose two new judges for the Constitutional Court; he will be the one to select the head of the supervisory body over media affairs. And one could go on and on.

Here I will concentrate on one "small" item. A "suggestion" of János Áder, former leader of the Fidesz parliamentary delegation, later, during the first Orbán government, the ruthless speaker of the house who didn't bother with parliamentary niceties and rarely allowed the opposition to speak about things he didn't want to talk about. Then for a while it seemed that Áder lost Orbán's confidence and he was shoved out of the country straight to Brussels. Mind you, he speaks no foreign languages with any fluency, although he put down English as a language in which he can carry on a conversation. However, when some enterprising youngsters phoned him and tried to speak with him in English he showed a total inability to communicate. Anyone who wants to have a good laugh should listen to that so-called conversation.

Áder is one of the founding members of Fidesz. He is the same age as László Kövér. They attended law school together and were members of the same residential college where Fidesz, first as a youth movement and later as a party, was born. It is somewhat puzzling why Viktor Orbán and company decided to use János Áder to come up with a proposal that the Fidesz caucus will put forth in parliament to be debated. And, of course, once it reaches the floor it will be adopted.

The proposal is outrageous. There is no better word for it. Let's assume that someone accuses the head of a company or a politician of fraud and the police decide that there are grounds for his arrest. This person could immediately be incarcerated and remain in jail until his case was decided on final appeal. Thus it could easily happen that an entirely innocent man accused of a non-violent crime could be jailed for years until the very slow Hungarian court system decided his final fate. And since in Hungary, unlike in the United States, the prosecution can also appeal, that procedure can be tortuously long. Some people fear that Fidesz will use this piece of legislation as the foundation for putting their political opponents into jail for years. For example, Ibolya Dávid, former head of MDF, and Ferenc Gyurcsány, former prime minister.

Of course, Áder's professed reason for such a change in the criminal code sounds much more innocent. As the law currently reads, the prosecutor's office must make the case that taking someone into custody is justified because there is a danger of escape or the person would influence witnesses if released. If the court decides that the person should be confined, he can be jailed for three months, after which the court again reviews his case. That can be repeated a number of times but in the most serious cases after four years of confinement the person must be released if his case still hasn't reached the courts. And that, says Áder, endangers the sucess of the prosecution.

According to legal scholars this proposal goes against international law which endorses the principle of a speedy trial. If a speedy trial is impossible, the accused must be released after a certain length of time pending his appearance in court. It turned out that Áder is not even familiar with current practice because the four-year limit is only applicable in the most serious cases and it almost never happens that such cases drag out that long. The current practice conforms to the European practice. Everywhere in Europe there is a limit on how long someone can be incarcerated without trial, but the experts claim that this proposed law would extend the time spent within prison walls practically indefinitely. People immediately thought of cases like that of György Hunvald and Miklós Hagyó, both socialist politicians, who could remain in jail for years on end without a final verdict ever being reached. These people are wondering whether the real reason behind the suggestion is Fidesz's desire for political retribution. Nothing would make Orbán happier than seeing Ibolya Dávid and Ferenc Gyurcsány in jail for years without ever appearing in court to clear their names.

Confused communication or something else?

Let me start with Viktor Orbán's trip to Berlin and his talk with his old friend Angela Merkel. A few minutes after the meeting there was a joint press conference, the video of which was immediately up on the website of the German chancellor. It was interesting to see how nervously Orbán behaved while listening to Merkel's brief talk. Until the camerman decided to cut away, we saw him using his right hand to listen to the simultaneous translation and constantly fussing with his left hand.

Both talked about the necessity of taxing the banks. Let's state first and foremost that this is a very popular move with ordinary citizens. However, there are at least two important differences between the German and the Hungarian bank levies. The Hungarian government is using it to fill a gap in the budget they themselves created by introducing tax cuts and other popular measures. The German tax will be used to create an emergency fund in the case of future bank failures. Also, the size of the Hungarian tax is much larger than the western plans hitherto introduced. I guess one ought to mention that although Viktor Orbán today in parliament repeated his often used excuse that the banks caused the crisis and the government had to bail them out, in the Hungarian case neither accusation is correct. The banks in Hungary didn't require government help and they certainly didn't cause the Hungarian economic crisis. In fact, the foreign owned banks kept their Hungarian branches comfortably liquid.

Orbán's most surprising announcement was that since the loan agreement with the IMF expires in October there is no necessity to continue negotiations with the IMF. Hungary will pay back the billions it borrowed from the IMF in the next two years and that's it. (I admire Orbán's optimism about the state of the Hungarian economy in 2011 and 2012!) From here on, Hungary will talk only to the European Union. The subject of these talks will be how Hungary will reduce its promised deficit of 3.8% this year to under 3% by the end of 2011.

But while Orbán in Berlin insisted on abandoning talks with the IMF, his deputy Tibor Navracsics, speaking with Michael Brainer, the EU commissioner in charge of internal markets and services, expressed his hope that Hungary would come to an agreement with the IMF. Lajos Kósa, vice-chairman of Fidesz, was also sure that Hungary's negotiations with the IMF will reach a satisfactory conclusion.

But it is even more interesting that today Péter Szijjártó, the personal spokesman of Viktor Orbán, claimed that Economy Minister "György Matolcsy made it clear over the weekend that the Hungarian government would of course continue talks with international organizations including the IMF, EU, and the European Central Bank."

Iryna Ivaschenko, the resident IMF representative in Budapest, also tried to be helpful and encouraging.  Today, in the early afternoon, she expressed her belief that "there was still a slight chance" of coming to an understanding but, she added, "first the Hungarian government must radically change its attitude toward the budget reform and to the independence of the national bank." The IMF, as opposed to what the Hungarians claim, complained not only about the size of the bank levy and the reduction in the salary of the bank chairman but more importantly about the obvious reluctance of the Orbán government to make long-range plans for deficit reduction. The IMF delegation thought that the "economic package presented is to a large extent of a temporary nature. It in no way assists the handling of the deficit of 2011." Indeed, structural reforms would be necessary to take care of the problem in the long run.

Ivaschenko also corrected Orbán, in case Orbán didn't know the facts: the IMF and the EU loan negotiations cannot be separated from one another. "The IMF worked hand in hand with the EU. This is a common program and it will stay that way." Orbán also seems to think (or pretends to think, we don't know) that the IMF has no right to inquire about any details. The Hungarian delegation told the IMF-EU delegation that they would stick to the promised goal of 3.8% and that's it. However, this is not the case. According to János Veres, finance minister in the Gyurcsány government who was the chief negotiating partner in the original agreement with the IMF-EU delegations in 2008, part of the agreement entailed "the constant monitoring" of Hungary's performance.

The IMF's spokesman in Washington repeated the Monetary Fund's readiness to continue talks at any time. But if American and Hungarian media reports are correct and the IMF-EU delegation left on Sunday because the Hungarians refused to lower the amount of bank levy, then the IMF offer might be in vain. The Hungarian parliament tonight voted with of course an overwhelming majority to accept the proposal for the enormous bank tax. It is quite obvious that Orbán has no intention of compromising. In fact, he repeated several times in the last two days that he and his government are ready to go against "the taboos of the last century." I guess one of these taboos is to fly in the face of international organizations and expectations. Moreover, if the IMF and the European Central Bank were upset over the Hungarian government's attack on the independence of the Hungarian National Bank, their concern was justified. Another piece of legislation that was accepted in parliament today was to reduce the salary of the chairman of the National Bank.

Financial Times, Deutschland published a long article about Hungary today in which the author, Christian Höller, declared that Hungary under Orbán's guidance is again moving toward bankruptcy ("Ungarns rechter Weg in die Pleite"). Höller claimed that Hungary since Orbán took over became "one of the most problematic" countries in Europe because Orbán combines two dangerous traits: obstinacy and nationalism. He believes in a "Hungarian solution." Indeed, he is brave and is ready to go against the whole world. In fact, today in parliament in an answer to Attila Mesterházy, he expressed his opinion that "the Hungarian elite must not behave like frightened chickens." He accused the MSZP delegation of siding with the IMF-EU delegation. As he said, "I heard all these objections a few days ago, only in English." And, he continued, "the [MSZP] politicians weren't really the representatives of the Hungarian people but panicky, nervous brokers."

Orbán after his meeting with Merkel gave a lecture at the Society for the Promotion of Culture (Gesellschaft zur Förderung der Kultur) entitled "What Next Hungary?" (Wie geht as weiter in Ungarn?" The author of the article added: "That is a good question."