Month: September 2010

Zoltán Illés, Hungarian undersecretary in charge of the environment

There are some people who, after being named to a higher office, lose their heads. Or, to use another "head" metaphor, their heads swell. They think that they can do anything their hearts desire. They become officious, rude bosses. This is what happened to Zoltán Illés, undersecretary in charge of the environment in the Ministry of Agriculture.

People who know Illés personally claim that after he spent a year and a half at Yale University doing research he suddenly considered himself the best, indeed the only expert on the environment in the whole of Hungary. I don't know what kind of research he did at Yale because he doesn't divulge any details about his time in New Haven, but his background is in chemistry and biology. Since then he spent another year and a half in the United States as a Fulbright-Humphrey scholar at Duke University in North Carolina.

Because he was born in Subotica (Szabadka), Yugoslavia, he speaks fluent Serbo-Croatian and his English is good enough for him to be an associate professor in the Central European University's Department of Environmental Sciences and Policy. All this is rather impressive, but a lot of people in the field have reservations about Illés's knowledge of environmental issues. In any case, he has been an ardent champion of the environment, mostly devoting his time to opposing projects which in his opinion were harmful to the environment. I remember one huge fight he led about an underground garage in Budapest which entailed cutting out some old trees and replacing them later with younger ones. If I recall, the garage was never built.

While he may have been effective as an environmental activist, one cannot say too many good things about Illés since he became undersecretary. Not long ago he announced that "he didn't expect any in-fighting in his department because anyone who resists his orders will be removed." Well, that's one way of having peace and quiet at the work place. He also came out with this gem: "I don't expect an assistant undersecretary to make professional decisions; it is quite enough if he simply follows my decisions that were reached in the possession of adequate competence." There is no teamwork here. The boss says what is to be done and his underlings follow orders. Surely, the man thinks that all his decisions are foolproof. After all, he is the only one who has the necessary competence.

A few days ago, Illés came up with an entirely new system of recycling. No discussion with anyone involved. He announced that he is ready to listen to them but "there will be no compromise." Then why bother? He is not interested in arguments to the effect that the new system might mean a loss of jobs because when it comes to this project "economic difficulties are no excuse." People argued that the introduction of the system might create chaos for at least half a year but that didn't make an impression either. He has made up his mind and that's that.

The latest Illés move was even more bizarre. He was on his way to some official function when he made a side trip to the site where a road is being built between Balatonendréd and Lulla. The road is about 10 kms long and at last it will allow the people of Lulla and Tab to reach the main highway next to Lake Balaton within a few minutes. At the moment there is one village which is only 10 kms from the lake as the crow flies but the inhabitants of the place must travel 33 kms to reach the highway. The people of Lulla and Balatonendréd have been waiting for at least fifty years for this road to be built. They managed to get all the necessary permits (33 in all!) and, more important, the money (3.5 billion forints), mostly from European Union subsidies. According to current plans the road will be finished by the end of next year.

Enter Zoltán Illés, the almighty undersecretary. He located the engineer in charge of the project and ordered him in no uncertain terms to stop work immediately. Locally, the incident caused total dismay. The local political leaders didn't want to believe their ears. The mayor of Balatonendréd told MTI that "the workers on the spot are still trying to recuperate from their shock at the behavior of the undersecretary." The mayor of Lulla was also informed that the "undersecretary's manner during his talks with the building contractors was unacceptable." He added that it is really extraordinary that an undersecretary makes decisions in a case that in no way belongs to his competence.

Illés wasn't moved. Although he was told on the spot that all the building permits were in perfect order, he didn't care. As he said, "one can write anything on a piece of paper." In plain language, he doesn't care about legality. He will stop the construction single-handedly.

The construction is being done by the Nemzeti Infrastruktúra Zrt (NIF) which is a company under the umbrella of the Magyar Fejlesztési Bank, the only state-owned investment bank. As soon as the new government was formed, all these state-owned companies got new CEO's, loyal Fidesz men. NIF also got a new chairman, Ferenc Orosz. The new head of communications at the firm is the favorite youngster of Fidesz–Dániel Loppert, whose name became known in 2002 when at a function he called Prime Minister Péter Megyessy a traitor and the police arrested him. They were a bit overzealous and Medgyessy himself intervened. Fidesz immediately approached the then teenager Loppert who subsequently became active in Fidelitas, the youth organization of Fidesz. Now, thanks to Fidesz's electoral victory, Loppert got a nice job. Loppert simply said that Orosz and Illés will get together this week to discuss the matter of the road construction.

I do hope that the two men will have an amiable discussion. After all, this will be all in the family, and according to László Kövér as well as Viktor Orbán, people with similar political outlooks easily find common ground. Mind you, they made that claim as a rationale for voting for Fidesz in the local elections–to get more goodies from Budapest than they would otherwise. I hope that this principle works in the thorny question of road construction as well.

The Hungarian prime minister’s encounter with the tax cut

Usually Viktor Orbán chooses his words very carefully. Most of his promises and accusations are phrased in such a way that they are ambiguous double talk. Before the elections he was very careful about refraining from any specifics, items that later the electorate might demand be fulfilled. If in this election campaign of 2010 there was anything that was specifically promised it was an immediate and drastic tax cut. There was even talk about a tax cut as early as July 1. Of course, tax experts pointed out that to work out an entirely new system of taxation is not an easy matter, and it cannot be introduced within a month or so.

Time went by and tax cuts remained a popular speech and interview topic, but they didn't seem to be either immediate or drastic. One government member said one thing and another its opposite. Eventually critics of the government came to the conclusion that either the new government has no economic policy whatsoever or there are huge differences of opinion within the government.

Only a few days ago the undersecretary in charge of taxation indicated that the introduction of the flat tax will have to be postponed until 2013. A day later his boss, György Matolcsy, announced that his undersecretary was wrong: a flat tax will be introduced as of January 1, 2011. However, he added, this flat tax will be combined with "family taxation." As far as I can figure out, that means that there will be features in the new tax law akin to a joint return in the U.S. and deductions linked to the number of claimed dependents. However, a flat tax is flat because there are no deductions and, as some people pointed out, the Hungarian system would be unique indeed. A flat tax plus deductions! It will be interesting if it ever materializes. If you asked me today whether it will be introduced on January 1, I would say no.

And now enters the most important person in any political or economic discussion: Viktor Orbán, the prime minister. A day after Matolcsy's promise that Hungary would switch over to a flat tax system as of the first of the year, he gave an interview to a local internet paper called serving the county of Komárom-Esztergom. To show how cleverly Orbán can answer a question I will translate most of the exchange. The reporter asked: "Will there be a flat tax from January on?" Answer: "We will have a new system of taxation." (Note that he doesn't say that it will include the idea of a flat tax.) Then a few lines later: "I made a clear promise at the time of the campaign that Hungary will have a simple, work- and family-friendly tax system. I also said that there will be tax cuts. Business taxes were already cut from 19% to 10% and that is a radical reduction. In addition, we scrapped ten different categories of small business taxes…. Naturally there are experts who suggest that these changes should not be introduced all at once but in two or three different stages, but of course the final decision is that of the parliament. The government can only suggest. I suggest that the changeover to the new system be done at once and as soon as possible."

Note that Orbán not once uttered the phrase "flat tax." Also he said nothing about January 1st. He simply said that the new system–whatever that may be–will be introduced as soon as possible. But since the introduction of lower taxes is on everybody's mind, it became obvious that Orbán's interview on a local internet website would not satisfy the curious public. He agreed to give a television interview last night on "Az Este." The interview was in essence a shorter version of his earlier talk in Komárom-Esztergom. Again, without uttering the phrase "flat tax" he said the following: "I think I can convince the members of the cabinet and I think we have enough strength to convince at least 50% of the members of parliament" to vote for an immediate tax reduction in one stage. "One can bet that there will be such a tax system as of January."

My first reaction was: "That's really very funny." Viktor Orbán is hoping to convince the members of his cabinet of anything? Or he is hoping to receive the confidence of at least 50% of the parliamentary members?  As far as we can ascertain the cabinet does what he tells them to and very often he speaks of government decisions as his own. (Several times he was caught saying "I decided" this or that.) Fifty percent of the members of parliament? But they have a comfortable two-thirds majority and Fidesz and KDNP members vote like robots. There is no question that if the government comes up with a new flat tax plus deductions there will not be one Fidesz-KDNP member who will vote against it.

So then what? Can we speculate that this time it's different? Is it possible that in the final analysis the members of the government will not heed his suggestion? Is it possible that they will convince him that, given the state of the budget, there is no way to introduce such a low level of taxation? It's possible. In this case Viktor Orbán will be able to tell his people: "You see, I tried, but tax experts are convinced that the introduction of a flat tax must be postponed."

I can of course be wrong. Perhaps the cabinet and the number crunchers will be convinced by Orbán that such a drastic step can be taken, but I somehow doubt it. As it is, staying under the 3.8% deficit target seems to be in jeopardy. Experts are convinced that the deficit right now is about 4.4%. Less money has been received than estimated and, although the government claims that it is very careful with expenses, I believe that there must have been an increase in expenditures. In the television interview Orbán also talked about the deficit. According to him by September 30th they will know whether the government, given the present situation, can keep the 3.8% deficit or not. If not, they will "have to take some steps but whatever these steps are they will not affect adversely the pocketbooks of the people. There will no be no austerity measures."

According to Péter Róna, the immediate introduction of the flat tax would be ruinous for the budget. My feeling is that there might be some changes in the tax system as of January 1 but they will not be the ones Orbán was originally talking about.

The current financial state of Hungary

I've written about Sándor Pintér a few times already. The appointment of the chief of the national police force as the minister of interior in the first Orbán government raised quite a few eyebrows. There was and still is a lot of speculation about why Viktor Orbán insisted on Pintér's appointment against all the criticism. I wrote about Sándor Pintér's checkered career again when the news surfaced that Pintér might be the minister of interior in the new Orbán government with even greater jurisdiction than between 1998 and 2002. Indeed, Pintér was tapped once again for the job.

Pintér started his career in the police force as a truck driver while being enrolled in the rather demanding College of Engineering. It seems that he didn't have what it takes academically. Eventually at the age of 30 he finished the police academy and in 1986, when he was almost forty, he received a law degree. In outward appearance he still looks more like a truck driver than a minister or the very wealthy businessman that he is. An amusing aside: when I was trying to get some biographical information on him and put in the search tag "Pintér Sándor," Google indicated to me that someone was already looking for him with a search tag "Pintér Sándor maffia"!

In any case, the leaders of the police loved Sándor Pintér since he was one of their own. The word was that all those civilian weaklings couldn't really handle the police. They didn't speak their language. Not like Sándor Pintér. Of course, one of the problems with the police force was that Fidesz in opposition made every effort to denigrate it by accusing it of all sorts of crimes. After a few years of this relentless attack, the police leaders became totally demoralized. They didn't dare do anything. If they took a hard line that was a problem. If they were soft then they were criticized for being namby-pamby. There was no way of pleasing Fidesz. As a result Pintér inherited a police force that was pretty useless. They had better equipment than before, but when it came to acting they simply didn't do what they were supposed to.

Pintér in the very first few days after taking office made a mistake. As far as Viktor Orbán was concerned, a very big mistake. While Orbán was busily hatching a witch hunt against former prime minister Ferenc Gyurcsány, charging him with being in cohoots with the police to kill "peaceful demonstrators," Pintér stood by the Budapest chief of police, Péter Gergényi. This was at the time that Gergényi was declared to be the co-villain in the drama in the fall of 2006. Pintér had to retreat.

It seems that Pintér has gotten into trouble again. On September 24 he gave a speech at a forum of service employees in which he said a few startling things. He predicted that in the near future the police will have added responsibilities because "the purchasing power of the population will considerably decrease, people will be poorer, and there will be a situation which cannot be solved without the police force." Moreover, he added, as a result of the worsening economic situation of the country, corruption will also grow, there will be more and more economic crimes. Criminal activities on the streets will multiply. "It is obvious that there will be more armed robberies." Thus the police will need more money. However, he had to admit that there is no possibility of raising the very low salaries of policemen as of January 1, 2011.

This was a pretty grim picture that indicated that after the municipal elections an austerity program will be introduced. Because, after all, why else would the living standards drop so dramatically that petty thievery, armed robberies, and corruption cases will multiply? MSZP naturally reacted to Pintér's speech immediately. Here it is, Viktor Orbán and Fidesz lied. After the elections a lot of people will lose their jobs. By now MSZP has demanded the release of the 2011 budget figures at least three times.

Several articles and opinion pieces appeared on Pintér's speech which came to the same conclusion as MSZP. After the elections will likely come a time of severe austerity. The right-wing papers simply ignored Pintér's words. The Ministry of Interior obviously felt that some explanation is necessary. So today they came out with such a cock-eyed story that Népszabadság, instead of just summarizing the MTI report, suggested that its readers read the announcement word for word because "the ministry's statement is difficult to interpret." The ministry's explanation was that MTI simply left out an important word or two from Pintér's speech that stated that "if more debt burden turns up that was not in the budget then…." In brief, the ministry tried to suggest that those "skeletons" still may fall out of the closet. A bit too late since by now it is fairly obvious that no skeletons were found in spite of diligent efforts to discover them.

It seems that Fidesz politicians themselves were surprised at Pintér's predictions. Apparently what he had to say wasn't part of the planned government communication in spite of the fact that Viktor Orbán himself in Kötcse and since then many times tried to temper lofty expectations. But Fidesz politicians who talked to Ildikó Csuhaj, reporter of Népszabadság, expressed their opinion that to utter such words a week before the municipal elections was unfortunate.

Fidesz remains hard at work cooking up schemes to raise money for the national coffers. Rumor has it that they are extending their reach to include not only the financial services industry but energy suppliers and communications companies as well. Or at least this is what János Lázár, leader of the Fidesz parliamentary delegation, indicated this past weekend. Unfortunately, squeezing all these sectors will most likely slow economic growth. And while the government says there's no money for teachers, doctors, or policemen, Viktor Orbán promises a sport stadium to Debrecen and a new bridge for Szeged. That is if the good people of Szeged vote for the Fidesz candidate for mayor. Just today I read that the government is preparing to invest in the Hungarian railways. Elsewhere one can read about a new bridge across the Danube between Komárom and Komárno.

All in all, it is difficult to to know what's going on exactly. No coherent picture is emerging about the economic plans of the government. A few days ago there was a report that Matolcsy's undersecretary in charge of taxation announced that the government had postponed the introduction of a flat tax until 2013. This morning the inimitable György Matolcsy said that as of January 1, 2011, there will be a flat tax. Meanwhile we know that this year a great deal less money was received by the treasury than the year before and by now 125% of the budget allocations for 2010 have been spent.

Rumors concerning the possible departure of György Matolcsy

In the last week quite a few articles appeared in the Hungarian press in which it was reported that György Matolcsy might be in trouble. The question is how much trouble. Some time ago (it may have been in a comment) I suggested that with all the financial troubles Hungary has run into lately perhaps the smartest thing would be to fire Matolcsy. With a new man who has the trust of the financial community it might be easier to start afresh. For example, to begin negotiations for another IMF loan that according to most analysts Hungary most likely will need. Of course, it is possible that these brilliant economic moves actually come from the chief and that Matolcsy is only executing orders from above. But even in that case, by sacking Matolcsy Orbán could save his own hide.

The first hint of trouble in the Ministry of National Economy (Nemzetgazdasági Minisztérium) stemmed from a serious difference of opinion between Matolcsy's ministry and Deputy Prime Minister Tibor Navracsics's Ministry of Administration and Justice (Közigazgatási és Igazságügyi Minisztérium) concerning forty-one high positions. In Navracsics's opinion Matolcsy was not entitled to make these appointments. The right belongs to a newly created center under Navracsics's ministry that decides on the hiring of civil servants. The result is that these positions remain unfilled.

A few days later there was another problem between Matolcsy and, this time, the Foreign Ministry (Külügyminisztérium). Matolcsy decided to sack all the members of the Hungarian secretariat that has the important job of keeping in touch with the Economic and Financial Affairs Council (Ecofin) in Brussels. The reason: the organization must reflect more closely the new governmental structure. The problem is that members of the secretariat are employees of the Foreign Ministry. My understanding is that János Martonyi didn't appreciate Matolcsy's unilateral action.

There are rumblings within the walls of the Ministry of National Economy as well. One cause of strife is that apparently the staff of the former Finance Ministry finds its new position in the mammoth ministry of György Matolcsy less than satisfactory. Newspapermen became suspicious when they heard that Ferenc Bathó, assistant undersecretary and the person most familiar with the details of the budget, suddenly went on a holiday. A few weeks before the budget must be presented to parliament. Apparently this leave wasn't voluntary. According to information received by Index, Matolcsy told György Naszvadi, undersecretary in charge of the budget, that "Bathó's days are numbered," although by all reports Bathó has been the real brains behind the budget ever since 1994. Surely, Matolcsy shouldn't get rid of important and knowledgeable civil servants. He has enough trouble without firing loyal employees.

Népszabadság learned from several independent sources that there is "a crack" in the relationship between the budgetary unit led by György Naszvadi and Matolcsy and that it is not Naszvadi's position that is in jeopardy but Matolcsy's. Matolcsy's activities to date have been controversial. According to the latest opinion poll even Fidesz supporters have their doubts about the wisdom of fighting with the IMF and the EU. Economists, even those who sympathized with the party, are skeptical about the course Matolcsy is taking. Perhaps the most important of these was Tamás Mellár, who criticized some of the economic decisions of the new government. Mellár is on the staff of Századvég's economic think tank, a decidedly Fidesz-oriented institution.

In addition, the everyday workings of the ministry leave something to be desired. Urgent plans don't get off the ground. And, of course, there is the budget on which a lot depends. Perhaps the whole future of the Orbán government. If the budget doesn't meet the approval of the market Orbán might be in serious trouble. Getting rid of the staff responsible for putting the budget together seems suicidal. But at the same time sacking Matolcsy would be an admission of the failure of the Orbán government's economic policy.

If Matolcsy is replaced, Orbán must make sure that his successor is a man who is familiar with the business world and enjoys the trust of financial circles. According to rumors that man might be Zsolt Hernádi, currently CEO of MOL, the Hungarian oil refining company.  Hernádi between 1989 and 1994 occupied various posts at different commercial banks. He was CEO of the Central Bank of Hungarian Savings Cooperatives between 1994 and 2001 and a member of its Board of Directors between 1994 and 2002. Between 1995 and 2001 Hernádi was a board member of the Hungarian Banking Association. According to the staff writer of Népszabadság responsible for economic matters, Hernádi might be better as head of the other "economic ministry," the Ministry of National Development. However, lately there have been rumors that István Kocsis, currently CEO of BKV, the Budapest Transit Authority, will be moving over to MOL. He denies it, but who knows? Maybe there is something in all these whisperings.

Parliamentary investigation Hungarian style

Of course, I'm talking about the sub-committee created to investigate the events of the fall of 2006 after Ferenc Gyurcsány's speech at Balatonőszöd was leaked. To this day we don't know who was responsible for handing the tape over to Viktor Orbán. Of course, I don't have proof of a direct route from informant to the Fidesz party leader, but we can infer, based on Viktor Orbán's public speeches during the summer of 2006, that he knew its contents long before it was released to the public. It was in July that he began returning time and again to the theme of "lies." His opponent's victory was based on lies, and as a result the Gyurcsány government was illegitimate.

In any case, the decision was made that the tape shouldn't be released until close to the local elections, scheduled for sometime in October. September 17 was deemed to be a good day. As it turned out, the Fidesz leaders were right. A siege of the public television station followed where the unprepared police force was unable to control the crowd. After some 200 policemen were wounded, the few still standing fled.

On the fiftieth anniversary of the Hungarian Revolution of 1956 there was again trouble. The police handled the situation somewhat better, but the policemen on the scene were unable to prevent the mixing of the mob that physically attacked them with the Fidesz supporters just leaving a mass rally where Viktor Orbán made a fiery speech. I'm not going to go into the details of why Fidesz organized this demonstration so close to Kossuth Square where the less savory elements had been gathering for weeks on end and why the police allowed Fidesz to hold the meeting allegedly commemorating the anniversary of the revolution at the Astoria Hotel where nothing of importance happened in October 1956.

Soon thereafter the government asked nine independent experts to write a comprehensive report on the events of the fall of 2006. The panel included experts in history, sociology, and the law as well as former high-ranking police officers. They were asked to study the events in their historical, psychological, and sociological context and to evaluate the appropriateness of the force used and the legality of the measures taken.

The committee's report was submitted to the government on February 2, 2007. It is a measured 260-page document. The chairman of the committee was Katalin Gönczöl, a law professor, and therefore one often hears about the "Gönczöl Committee" in place of its official, long name. The introduction to the report emphasized that the members of the committee didn't want to pin guilt on anyone because the committee wasn't supposed to take the place of the justice system. The report is worth reading, including the historical background that sketches out the failed Hungarian attempts at making it in this world. There is talk here about the Hungarian predilection to blame others for their problems, be they the Austrians, the Russians, the Jews, or the "commies." The historical section is most likely the work of Mária Ormos while the detailed description of the unpreparedness both mentally and physically of the police was done by Antal Kacziba and Mihály Vörösmarti, former police officers.

In addition, the opposition relied on another report by Krisztina Morvai, today Jobbik EU parliamentary member. Her report is more compassionate and less objective. One could call it partisan. It is a one-sided description of the police brutality that certainly occurred but not to the extent Ms Morvai tried to portray. She listened to only one side and therefore the value of her work is questionable.

So, there were two reports. If they didn't quite satisfy Fidesz the party could have suggested setting up a parliamentary committee to investigate the "true" story of these events. An investigative parliamentary committee according to house rules must follow the principle of parity. That is equal numbers representing the government and the opposition. Although between 1998-2002 Fidesz never once allowed the creation of such an investigative committee despite several requests by the opposition, between 2002 and 2010 during the socialist-liberal rule every such request was acceded to. Yet, Fidesz didn't push for the creation of such a committee. One could ask why not.  Tamás Bauer thinks that a committee based on parity was not to Fidesz's liking. Now that they are in power they can simply set up a sub-committee under a standing committee and in that case the government parties can have the majority. This is especially handy when the government members of the sub-committee have preconceived ideas of the outcome.

The young chairman of the sub-committee is Gergely Gulyás, a lawyer and a relative newcomer to Fidesz. I predict a fantastic career for Mr. Gulyás in the party because in my opinion he has all the necessary qualifications with the added benefit that he seems to be smarter than the others who are also entrusted with Fidesz's political retribution game, like Ferenc Papcsák, Gyula Budai, or his fellow sub-committee member Máriusz Révész.

MSZP decided not to take part in the work of the sub-committee. One can debate whether this was a smart move or not. Sure, it doesn't look good that they refuse to "investigate" their own alleged sins, but at the same time how can anyone sit next to Tamás Gaudi-Nagy, György Budaházy's lawyer who was an active participant in the mob action in the fall of 2006? Or to investigate together with Máriusz Révész who claims he was beaten senseless by the police on October 23, 2006? Yes, these people are also members of the sub-committee.

Both Gulyás and Révész have made it clear in public that they are convinced that the police received "political orders." And who gave these orders? Ferenc Gyurcsány himself. This is what they are trying to prove, thus far unsuccessfully. They are trying their darndest to find at least one person who will say, "yes, the prime minister told me in no uncertain terms to beat the peaceful demonstrators to a pulp." So far no luck, but the search continues. Sometimes with innocent babes-in-arms on their side. Like LMP's Tímea Szabó who seems to be entirely oblivious to what's going on and who praised Chairman Gulyás (who is indeed very smooth) for his objectivity and fairness. The minutes of some of the meetings are already available.

Although most likely the Fidesz members of the sub-committee will come up empty-handed, politically these proceedings may be very useful for Fidesz. They want to keep alive the public outrage at the illegalities of a "dictatorial" socialist regime. The adjective "dictatorial" comes from the most reliable source, Viktor Orbán himself (July 29, 2006). Meanwhile a few days ago a documentary film became available on the internet on the "siege" of the television station. There one can see the bloodthirsty Hungarian policemen being brutally beaten by the "revolutionaries" who attack the symbol of oppression with the words: Ria, Ria, Hungária, a soccer chant.

A critique of the New Széchenyi Plan

There are days that I am in a quandary. There are too many topics that should be covered. Every time I find something interesting I jot it down and at the moment I already have five items on my plate. There are, for example, the proceedings of a dreadfully dangerous parliamentary sub-committee that is hard at work falsifying history. Or the allegation that Viktor Orbán was responsible for the disturbances that occurred in September-October 2006. I read a fascinating article about the return of corporal punishment sanctioned by the Hungarian parliament in 1920. Or a comparison of Kazakh and Hungarian media laws. After all, Jobbik is in love with Kazakhstan and the Kazakhs, the closest relatives of Hungarians. According to them.

However, I settled for a more mundane topic, a critique of the New Széchenyi Plan by an economic research institute called GKI Gazdaságkutató Zrt. The economists of GKI didn't find too many positive items in the document György Matolcsy and Viktor Orbán released at the end of July.

The first Orbán government made hay out of the original Széchenyi Plan when in fact it was a modest government attempt at stimulating the economy way back in 2000. Fidesz politicians and government spokesmen talked about the Plan as if it were the ultimate solution to all the economic ills of the country. In reality, relatively little money was allocated to the project–120 billion forints, which as we hear often enough nowadays from MSZP politicians was about the same amount the town of Debrecen received over the last four years from the Gyurcsány-Bajnai governments. However, if one believed all the propaganda surrounding this relatively modest amount of money that was dispersed mostly among Fidesz supporters, one would have thought that it was the most important attempt ever to transform Hungary's economy.

It seems to me that a repeat performance is under way at the moment with the New Széchenyi Plan (Új Széchenyi Terv/ÚSzT). The economists at GKI try to find a few nice things to say about the Plan to sweeten the bitter pills that follow. They consider it a positive that its authors think about the long run, 10-20 years. Perhaps, but as I mentioned a couple of days ago György Matolcsy talks about goals that will be achieved in twenty years without the slightest attempt to point the way toward those goals.

GKI finds something else praiseworthy in the Plan. It is allegedly not the final product but a preparatory document. According to Matolcsy, the government is expecting expert advice, a discussion of the text which they will take into consideration. If you ask me, they will not. They will not because they are unable to put together a coherent plan. Or, perhaps they don't even want to produce a plan that would please GKI's economists because that would require a total reorganization of Hungarian administrative, professional, and economic life from health care to education and public administration. And such reorganization–reforms if you wish–would hurt certain groups' interests. And somehow Viktor Orbán thinks that one can govern in such a way that "no one will be hurt," as he himself said not long ago during one of his television interviews. I have to disappoint Viktor Orbán: one cannot.

After this faint praise GKI comes to the heart of the matter: "This study … in its current form is neither methodologically verifiable or convincing." Desires, wishes, goals are often linked to verbs like "should be" or "must."

I'm not going to go into the fallacies of building a "curative Hungary" here because we've talked about this a lot. Hungarian medical know-how might be excellent (and I even doubt that), but the Hungarian mortality rate and the poor health of the population serve as counter-propaganda to marketing efforts in this direction. There is no discussion of health-care reform in the Plan. But without it–which again cannot be achieved overnight–there is no chance of inducing foreign visitors to seek medical help in Hungary.

The New Széchenyi Plan also spends quite a bit of time on house construction. There is no question that house construction is one of the important indicators of a country's economic well being, but in Hungary there are some fundamental problems with the whole industry. First, there is a severe shortage of capital and, as a result, a whole chain of contractors and subcontractors don't get paid for months on end. Or ever. GKI's critique of the Plan mentions that 60% of owners of newly established companies have already failed once, leaving unpaid bills behind. There are also problems with expertise; there are too many people who simply don't know what they are doing or are doing a substandard job by, for example, using inferior materials. The poor homeowner rarely has the knowledge to supervise the work. I personally visited a  luxurious home of some friends where there was a substantial crack, at least an inch wide, on one of the supporting walls. He sued. I don't know how the story ended. Most likely not well.

If I lived in the country I certainly would not buy an apartment in a co-op. Laws governing such dwellings are so poorly written and so toothless that it is practically impossible to make any repairs to the building outside of own's own apartment. Thus, a simple repainting of the stairwell can be stopped by a single owner's refusal to give his consent.

GKI Zrt also has some harsh words to say about ÚSzT's handling of the concept of "employment." According to their verdict, the authors lack an in-depth understanding of the problem that is by now twenty years old. They seem to be unaware of earlier attemps to remedy the situation and the causes of their failure. Often they suggest solutions that have been tried earlier without any results. Our economists concentrate on a chapter called "Lagging behind in employment" which brings up Czech, Polish and Slovak examples. Behind rapid growth there is greater employment. Of course, this is true but only if the people are engaged in work that allows for high productivity. In the countries mentioned it meant foreign investment by large multinational companies. But the New Széchenyi Plan is concentrated on domestic small- or medium-size companies with relatively low productivity.

These are the most important observations. The document is available in Hungarian on GKI's website.



An opinion on the current Hungarian situation

In Hungarian internet circles in the last four or five days an article has been circulating that is being embraced by many of its readers. The title is "Cipolla" and it was written by László Bartus, editor-in-chief of Amerikai-Magyar Népszava Szabadság, a Hungarian-language weekly published in New York. Bartus was a well-known Hungarian journalist who also published several books before moving to the United States. This morning I was asked by someone in Hungary to translate this article into English because, as I was told, the world has to know what is going on there. I promised a fairly detailed summary.

First, something about the title. It is borrowed from Thomas Mann's most political short novel, Mario and the Magician. The story, according to most literary analyses, is a condemnation of fascism through the character of Cipolla, a hypnotist who uses his mental powers to control his audience. He represents the mesmerizing power of authoritarian leaders in Europe at the time. He is killed on the spot by one of the people he misused–Mario, the waiter. Cipolla's assassination by Mario is viewed not as a tragedy but a liberation for his audience.

Once already I wrote about Cipolla. It was almost two years ago, under the title "Mario and Cipolla in the Hungarian parliament." Then, a freshman Fidesz member of parliament read his own poem in which he compared Ferenc Gyurcsány to Cipolla and expressed his hope that one day a Mario would arrive and kill him. You can imagine what happened after this charming call for murder.

Well, Bartus doesn't want anyone to kill Cipolla. He simply claims that "the country is in the hands of a Cipolla, a magician who bewitches, misleads, and manipulates it."  But, Bartus says, the Hungarians will never admit that they made a mistake when they entrusted the country to a Cipolla. They will blame someone else as is their wont.

Bartus claims that in the last two weeks or so events took place in Hungary which point to the reasons for the nation's depravity and for the country's loss of competitiveness. Who is responsible for that? "Viktor Orbán and his propaganda machine" that for years has been repeating that the former government stole the Hungarian people's last penny, that the budget consisted of falsified data, that there was no need for reforms, that austerity was unnecessary, and that it was perfectly all right to have a deficit as high as 7.5%. At the same time Orbán systematically destroyed the ability of the government to govern, ruined people's faith in democracy, questioned the legitimacy of the constitution. By now he has managed to destroy the whole institutional underpinning of democracy.

When Orbán at last became prime minister and when everybody was expecting him to show what he can do, it turned out that all that talk was based on nothing. It turned out that "they lied, they slandered, they cheated." Whatever they said wasn't true. And what is an even bigger problem, it seems that they are incapable of governing. "Within 100 days they managed to produce a 400 billion forint loss to the Hungarian taxpayers because they don't know what they are doing." Bartus continues: "If all their ideas were based on wrong assumptions, they could at least admit that they were wrong or lied. It depends on how charitable one is. And because they are unable to do anything else, they might as well pick up their hats and leave."

What happened? According to Bartus, "one man built up a propaganda machine, a structure that he alone controls, and created a sect that believes in his omnipotence. He uses patriotism to manipulate, to stigmatize and exclude his political opponents. He managed to make intelligent people become brainless admirers, obedient and fearful subjects…. He managed to turn people against each other, make people hate each other, and taught his people to hate the outside world…. He created sheep and obedient parrots around himself who without the slightest sign of thinking keep repeating what they are told…. With his destructive speeches he poisoned the whole nation. For the sake of his own power he managed to destroy the res publica, let loose the extremists, and create a civil war within the country. He created a situation in which peace and quiet is an impossibility as long as Viktor Orbán is the prime minister…. Hungary has lost at least 25-30 years because it produced a man named Viktor Orbán from Felcsút."

According to Bartus he managed to achieve all this by "telling a tall tale," claiming that those who oppose him conspire against the nation in the service of foreign powers. These same people used their power in the last eight years to rob the Hungarian people blind. The current plight of the country is their fault. But by now it is clear that all this talk was a lie and pure incitement of public passions. Orbán used his famous double-talk. He said one thing inside Hungary and something else for foreign consumption. But, says Bartus, this game that works inside of the country doesn't work outside of it. Foreign leaders are not stupid and they know who Viktor Orbán is. So, Orbán has to tell the truth to the European Union. He has to admit that the Bajnai government did a very good job and that he is in fact going to continue on the same road his predecessors marked out because he has no choice.

This double-talk can have interesting consequences. A few days ago a final report on the performance of the former government had to be approved by parliament. The report objectively described the situation as of the end of last year. Orbán's hand-picked politicians couldn't believe their ears when they heard the version produced for foreign consumption. After all, it was exactly the opposite of what they have heard for years from their leader. Then an incredible thing happened. One after the other Fidesz politicians got up and kept attacking the performance of the former government which the official report had just praised. As if they had heard nothing. That's called brainwashing. Or, as Bartus claims, "we are witnessing a psychological experiment" that is a surprising development in twenty-first century Europe.

The article is much longer than this brief summary. Anyone who's interested in the original can read it in Hungarian on the website of Amerikai-Magyar Népszava.

György Matolcsy’s fantasy land

One problem with György Matolcsy, among many others, is that he talks too much. I very much doubt that it is necessary to repeat ad nauseum that Hungary is not planning to sign another loan agreement with the IMF. Yet every time he opens his mouth he volunteers this information. Wouldn't it simply be better not to talk about the subject or, if someone asks, to give an evasive answer? Because what will happen if after all Hungary is in need of help? I'll tell you what will happen. Matolcsy will fall on his face.

He is also prone to talk big. I'm sure many of you are familiar with the tale of János Háry, a hussar veteran from the Austrian army who sits in the village inn and tells fantastic tales of his heroism. How he won the heart of the Empress Marie Louise, the wife of Napoleon, and how he singlehandedly defeated Napoleon and his armies. Matolcsy reminds me of this Hungarian tale-spinner who was made world famous by Zoltán Kodály's Háry János Suite. Kodály's piece starts with a huge musical sneeze because "according to Hungarian superstition, if a statement is followed by a sneeze of one of the hearers, it is regarded as confirmation of its truth…. One of Háry's faithful listeners sneezes at the wildest assertions of the old tale-spinner." I already have an itchy nose.

Way back in July when introducing the New Széchenyi Plan Matolcsy said that "according to plans Hungary's economic development and the country's living standard must supersede the European Union average by 2030!" Yes, you heard it right: by 2030. This is the plan. "This will be a historical success … because in the last 150 years Hungary has never managed to reach such levels." It seems that this plan is so well developed that everything is already worked out for the next twenty years and this is… what do you think? The New Széchenyi Plan!

By September he drew a much darker picture. The inherited problems are almost insurmountable. Hungary must navigate a veritable minefield. The economic downturn will definitely last until 2012. Yes, the future is bleak but "we must retrace our steps from the future toward the present instead of trying to crawl from the present inch by inch toward the future." An interesting idea! A few days later in a lecture, "New government, new economic ideas, plans and opportunities in the economy," he said that "Hungary must be re-industrialized." Whatever that means.

Hungary will not only supersede the EU's economic development and living standards by 2030 but "there is a real possibility that Budapest might become a regional center of a Budapest-Vienna-Bratislava triangle." What Budapest-Vienna-Bratislava economic triangle? Did anyone ever hear of such a thing? It is certainly new to me. And if that weren't enough he added to this triangle the Czech Brno. Budapest will be a center of research and development and a hub of innovation. He didn't let us know what kind of innovation he had in mind.

But now comes the real surprise. All this depends on the excellence of Hungarian universities. Hungary will have to create "one of the 200 best universities in the world." Oh my! Wouldn't it be wonderful? At the moment no Hungarian university can be found in the first four hundred best universities in the world. Moreover, one cannot create a top-notch university overnight. Not even in a decade. If Budapest's future as a center of research and development of the Budapest-Vienna-Bratislava triangle depends on the creation of a university that belongs to the prestigious list of the top two hundred, I'm afraid the Hungarian capital must wait a long time to reach the heights envisaged by György Matolcsy.

So, on the one hand, Hungary must be re-industrialized because high living standards can be achieved only in countries with a strong industrial base. On the other hand hand, Matolcsy emphasizes elsewhere the development of tourism and agriculture that would employ many unskilled workers. His other hobby horse is medical tourism which again is a pipe dream at the moment because Hungary simply is not equipped to provide first-rate medical care for people from all over the world seeking treatment for relatively little money. Hungarian hospitals cannot even take care of the country's own population properly.

Matolcsy cannot come up with anything more imaginative than more and more spas while apparently there are many underutilized ones already.  These were built or renovated with government assistance in the original Széchenyi Plan. Another pipe dream is sport tourism. The best drawing card is soccer but Hungarian soccer is in terrible shape although Viktor Orbán is spending billions on soccer academies. However, there are no modern arenas and the soccer games usually end up in brawls. Respectable people rarely attend them. However, I was happy to hear that the town of Debrecen is getting a huge arena with government help. I hope you haven't forgotten who the mayor of Debrecen is. None other than Lajos Kósa who played such a major role in creating the financial crisis in June that cost Hungary and the Hungarian people billions of forints. I guess this new arena is payment for a job well done.

Even I was astonished when I put together this short survey of Matolcsy's utterances in the last few months. So much nonsense on one page: hard to fathom. But what will happen to a country's economy in the hands of a man who lives in fantasy land?

Conservative historians in Hungary?

Huge political controversies can erupt in Hungary, even on Sundays. Here is the latest. Yesterday morning Árpád Szakács, a lawyer and history buff, gave a press conference in front of the Budapest Public Library named after its founder and chief librarian, Ervin Szabó (1877-1918). He demanded the removal of Szabó's name because he was a communist.

First, some background. On September 16 MTI reported that a group of historians established a foundation "to correct and neutralize the negative influence of Marxist historical writing that is still perceptible" in Hungary. The new organization is called the Foundation for National Conservative Historical Research and is headed by Gábor Vincze, editor-in-chief of a publication called Nagy Magyarország (Great Hungary). As the people close to the publication explained, the name cannot cause any confusion concerning possible revisionist tendencies because the title is not Nagymagyarország or Nagy-Magyarország, which would designate Greater Hungary. No, they simply want to make it clear that their research extends to all regions of the Carpathian Basin. I might add here that this has been always the case in Hungarian historiography and the distinction seems forced to me.

Nagy Magyarország is not available on the Internet, but from what I managed to find out most of the people who are involved in its publication are either members of Jobbik or very closely associated with the party. Árpád Szakács is the publisher of Nagy Magyarország. Among the contributors one can find a Jobbik member of parliament and someone from the editorial board of Barikád, the official organ of Jobbik. It seems that Nagy Magyarország is "the historical arm" of Jobbik.

What I find astonishing is that reactions to Szakács's demands pro and con talk about everything, including the nature of Ervin Szabó's political views, except what is really important: the far right is working on rewriting Hungarian history. They are trying to eradicate all traces of the Hungarian social democratic tradition of which Ervin Szabó was a part.

The Jobbik attack on Hungarian history began with an assault on Mihály Károlyi, the prime minister, later president of Hungary in 1918-1919. They demanded the removal of his statue that stands close to Parliament because, according to them, Károlyi was a traitor who was responsible for the Treaty of Trianon and who handed over power to the communists. I'm not planning to go into the details of this very confusing period, but believe me that Károlyi didn't do anything of the sort. He happened to be a decent man who thought that because of his well-known pro-Entente stance the Great Powers would be kinder to Hungary. As we know, that was not the case. The accusation that he handed over power to the communists is also baseless.

One could easily ignore Jobbik's demands if they didn't receive support from important Fidesz politicians. In the case of the Károlyi controversy it was László Kövér, the speaker of the house, who came to the rescue. Yes, he said, Károlyi's statue must go. He even had a suggestion about who should receive a statue in its place: Anna Kéthly, one of the leaders of the Hungarian Social Democratic Party who ended her life in exile after the 1956 Revolution.

There is no question that Ervin Szabó was a socialist who translated the works of Marx and Engels into Hungarian with his own introductions. It is also true that in his later years he was attracted to revolutionary syndicalism, but it seems to me that Jobbik's real problem with Szabó is his total rejection of any kind of nationalism. If we had all read Magyar Hírlap religiously we could have predicted that Ervin Szabó would soon be a target. Gábor Szabó, one of the founders of Jobbik and the Hungarian Guard, wrote an article in Magyar Hírlap (September 17, 2010) about Ervin Szabó entitled "An anti-Hungarian 'revolutionary.'" (In fact, in the original it was "népforradalmár" [people's revolutionary], a word that doesn't exist and makes no sense.) In it, he accused Ervin Szabó of being the initiator of the Hungarian socialist movement's antagonism toward natonalism which is of course nonsense. After all, social democracy was a movement based on internationalism.

In any case, in those days being a social democrat or a syndicalist or a translator of Marx and Engels was tolerated by the authorities. Ervin Szabó published widely in Népszava, the official organ of the Hungarian Social Democratic party, he became founder and chief librarian of the Municipal Library and was also accepted in Hungarian liberal circles. But this world is totally alien to Jobbik's leaders. Even historical figures who don't share their worldview must be banished. Their statues must be removed, streets or institutions named after them must be renamed: they were communists, traitors, "nemzetietlen," or whatever. They held opinions different from what Jobbik considers to be acceptable. And that's enough.

Géza Szőcs, born and educated in Romania, decided to support Jobbik in its quest to marginalize Ervin Szabó, the man who introduced the public library system to Hungary. Szőcs is a poet and writer who was picked by Viktor Orbán himself to head what used to be the ministry of culture. A few months ago Szőcs got all mixed up between linguistics and DNA; echoing Jobbik's infatuation with Kazakhstan, he promised money and government support to find the real relatives of the Hungarians in that region. He now wholeheartedly supports Jobbik's demand to remove Ervin Szabó's name from the Municipal Library network in Budapest. After all, he knows so much about syndicalism. Just as much as he knows about the origins of Hungarians.

And now we come to the crux of the matter. We don't know where Jobbik ends and Fidesz begins. The Hungarian right is composed of shades of radicalism that has nothing to do with conservatism even if Jobbik's historians call themselves "nationalist" and "conservative." The editors of Nagy Magyarország proudly claim that well-known, mainstream historians, economists, and academics have published in their quarterly. And indeed, Géza Szőcs himself appeared in the very first issue which was devoted to Trianon. We find in subsequent issues the names of the late Jenő Gergely, ELTE professor of history, Ernő Raffay, historian and undersecretary in the Antall government, Sándor Szakály, military historian, László Bogár, economist, member of the first Orbán government, and one could go on.

With thousands of threads these people are connected to one another and thus it will be practically impossible to get rid of Jobbik. Or, rather, one can destroy it as a party, and Viktor Orbán is very skillful at such maneuvers, but the spirit will live on in any party that claims to belong to the right.

Yesterday’s big news: Gyurcsány agrees with Orbán on Azeri natural gas

As I mentioned yesterday, Ferenc Gyurcsány agreed to write five articles for a new column launched by the editor-in-chief of Galamus, an internet news and opinion website. Most newspapers immediately picked up on the fact that Gyurcsány was commenting on the political news of the week and normally summarized what he had to say. The biggest splash was his last note. He decided to defend Viktor Orbán's trip to Baku and his signing an agreement with Georgia, Azerbaijan, and Romania to build a new pipeline from Azerbaijan and Georgia to Europe via Romania and Hungary. I wrote about the project in detail a few days ago.

Since then most commentators have viewed the project as unrealistic for several reasons, including the lack of a sufficient amount of available natural gas in Azerbaijan and the expense of liquedation and regasification.  People also pointed out the diplomatic complications such a project will most likely create in Hungary's relationship with the European Union and Russia. I personally share these worries as should be clear from my earlier writing on the topic.

Ferenc Gyurcsány thinks differently. He began his article by quoting Gábor Horváth in Népszabadság, who argued that "Viktor Orbán administered a huge kick in the teeth of the Nabucco pipeline" when he signed a letter of intent to build the AGRI pipeline. According to Gyurcsány, this is "an exaggeration."

First he renumerated Europe's natural gas needs, which used to be 500 billion m3 a year. Today it is, due to conservation and the growth of green energy sources, approximately 450 billion m3. One third of these needs is produced locally, one third comes from Russia, and the rest from elsewhere. Hungarian consumption is 13-14 billion m3 per year of which 80% comes from Russia. Such dependency on one source is worrisome, and decreasing this dependency is of paramount importance.

The current risk is twofold. One is the route of the pipeline. There is only one pipeline coming from Russia and it goes through Ukraine. If there is any problem between Russia and Ukraine concerning the gas supply, no gas can reach Hungary. Disputes between these two countries have been numerous and there were weeks when Hungary received no natural gas whatsoever. During Gyurcsány's tenure as prime minister Hungary signed an agreement with Russia concerning the building of another Russian pipeline called the Southern Stream about which one can read in this blog. At that time Viktor Orbán attacked Gyurcsány for dealing with the Russians, and I understand that the United States was also unhappy about this agreement. Some people accused Gyurcsány of being too friendly with Russia and turning his back on the Nabucco pipeline, a European Union project. However, Gyurcsány kept repeating that Hungary is also supporting the Nabucco pipeline because he considered that drawing on three sources of natural gas was better than relying on one or two.

The other problem with the current situation is that all the gas comes from one source, meaning Russia. Outside of Russia there might be two potential sources. One is the area between the Caspian Sea and the Caucasus, especially Azerbaijan and Turkmenistan, and other the Gulf region, for example Qatar. AGRI and Nabucco would carry natural gas from the former region while liquefied gas (LNG) could come from the latter to Croatia and from there to Hungary.

The Southern Stream and Nabucco could each carry between 10 and 30 billion m3. Half of this amount according to European Union regulations must be given to countries that are not directly involved with the project. The rest is to be shared by the countries who are signatories to the agreement. In Hungary's case that would mean between 2 billion m3 at maximum capacity or at minimum only 700-800 million m3. AGRI according to news that reached the public would produce 2-8 billion m3 which means that Hungary would receive only a few million m3 of natural gas a year through AGRI. Thus, concludes Gyurcsány, neither of these projects solves Hungary's dependence on Russian natural gas by itself. Therefore, it is a good idea to work on several projects at the same time.

Gyurcsány admits that we know relatively little about the AGRI project. We have been told that it will be able to carry between 2 and 8 billion m3 of gas a year and that the cost of building the pipeline would be between 1.5 and 4.5 billion euros. The two most important considerations here are the availability of gas and the financing. As for financing Georgia, with its very large debt, is in the worst situation. Of course, Hungary's debt is also far too high, and Romania's situation is not rosy either.

An even bigger problem is the Azeri natural gas supply. Azerbaijan contracted to supply the Turks (6 billion), the Russians (2 billion), the Georgians (1-1.5 billion) and even the Iranians (a few million m3 ). That amounts to about 9-10 billion m3 per year. In addition, Azerbaijan itself needs about 10 billion cubic meters. That is altogether about 20 billion m3. Azerbaijan also promised to supply Syria (1 billion), Jordan (1 billion), and Nabucco (10-12 billion) in addition to AGRI (2-8 billion). But in 2009 Azerbaijan produced only 16.9 billion m3 and this year's production is estimated to be 17.2-17.9 billion m3. Azerbaijan's hope lies with the Sah-Deniz fields that are supposed to be further developed by BP, but the work is being postponed for obvious reasons–BP's oil spill in the Gulf of Mexico.

Yet, with all these obstacles, according to Gyurcsány, Orbán did the right thing when he went to Baku. The opposition should not criticize him and accuse him of spending too much money on a private plane. This is petty and not worthy of a "responsible" opposition. Well, I don't think that he will find a similarly generous gesture on the other side.