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A new poll in Hungary

October 31, 2008 Comments off

Today I will be brief because occasionally I have other mundane duties. For example, grocery shopping. I also had to buy some gasoline for the lawn mower and am happy to report that the price of a gallon of gasoline was $2.55. Quite a change from a few weeks ago. In Hungary the price of gasoline also went down, but because of the weakening of the forint and the strengthening of the dollar Hungarians will not notice as drastic a drop as we do here.

Népszabadság often asks Medián to conduct polls on various aspects of economic and political life. In October there were three polls that addressed various issues surrounding the world economic crisis. And what were the findings? The adult population is aware of and increasingly worried about the situation. Moreover, they feel the need for cooperation among political and economic leaders to solve the economic difficulties. The majority of the people are convinced that the financial and economic problems associated with the international crisis will last at least a year (26%) or longer (42%). Ninety-five percent of Hungarian adults are certain that the unemployment rolls will grow and 92% are sure that the forint will weaken. Therefore the monthly payments on loans taken out in euros or Swiss francs will be larger than before. For some strange reason they think (74%) that the price of gasoline will also go up. Almost 70% of those who answered the survey think that people's savings will be in danger. A very large majority (71%) are sure that they and their families will be adversely affected by the crisis. None of these results are terribly surprising.

What is more interesting is people's opinion about Gyurcsány's handling of the crisis and Orbán's potential as a crisis manager. We must keep in mind that Orbán is vastly more popular than the prime minister. People still think that Orbán is a more sympathetic person, but when it comes to the handling of a crisis situation the two men are neck to neck. That is, many people who may find Orbán's politics more to their liking think that he would not be the perfect man in a crisis situation.

I may also add that the majority of people perhaps for the first time in recent history feel that society as a whole must be ready for sacrifice. This is a huge difference from earlier times when sacrifice was a dirty word. No one was ready to cough up even $1.50 as a health care co-payment. During earlier strikes the majority of the people sympathized with the strikers even if they themselves were inconvenienced by the strikes. Today the trade unions cannot rely on the sympathy of the population at large.

All in all, the government is handling the situation as well as can be expected, perhaps even brilliantly. A small news items revealed that János Veres, minister of finance, is in China negotiating a big investment deal in Hungary. One attractive feature of Hungary apparently is the rather large Chinese population. (There is even a school for Chinese youngsters or for anyone interested in bilingual education.) Another rumor has it that the Hungarian government is negotiating with the European Union to speed up its entry into the eurozone. If Hungary is able to achieve either, it will be a great boost to the economy as well as to the MSZP government.

The IMF and ECB loans and Hungarian politics

October 30, 2008 2 comments

The first surprise was the size of the package: twenty billion euros. The initial guess that appeared in Forbes magazine was about half that amount.  Apparently each country has an IMF quota, and twenty billion euros is ten times that of Hungary's. Naturally the two political sides in Budapest interpret the generous loan offer entirely differently. The government claims that receiving a line of credit of this magnitude shows the lending insitutions' trust in the country. Fidesz emphasizes how serious Hungary's economic and fiscal difficulties are if the IMF and ECB feel compelled to offer that much money. For good measure Viktor Orbán and his former minister of finance, Mihály Varga, repeat at least ten times a day that even applying to the IMF for a line of credit is "the greatest shame" for which Ferenc Gyurcsány is solely responsible. It especially hurts Hungarian pride (and says a lot about the superiority complex of its inhabitants) that Hungary is mentioned alongside Ukraine and Pakistan. Or some South American country! Orbán went so far as to say that Hungary could perhaps ask for admission to the Union of African States. All that sounds pretty bad to my ears, but perhaps I'm too sensitive.

The other good piece of news is that the loan was given under very favorable terms. No one knows the exact number, but people talk about 5-6%. The yield on Hungarian government bonds is twice that amount, and some of Hungary's outstanding loans most likely carry a much higher interest rate. I don't know whether the government is planning to pay off some of its more expensive loans with cheaper money that could be called down from the IMF. In any case, for at least two days everything looked good: the forint was strong and the Budapest Stock Exchange followed suit. Today, in the standard two steps forward and one step back scenario, the forint started falling again and the BUX had a bad day. The forint was not the only currency in the region to fall; the Polish zloty and the Czech koruna also had the same fate.

World markets are not trading on fundamentals. There's a global deleveraging and a flight to safety. Hungary is caught in the maelstrom. Sooner or later the forint and the stock exchange will settle down, I'm sure, but the spillover of the global slowdown into the Hungarian economy has already begun. Today General Electric, which employs about 15,000 workers in Hungary, announced that it is letting 500 workers go. Of its nine factories one will be closed.

After the government announced a freeze on salaries of state employees for a day there was stunned silence, but in no time the trade unions regained their voice: they threaten with strikes. And just think about it: from doctors to teachers to firefighters and policemen. They don't understand why "the people have to pay again."  As if there were any other way of saving money. The president of the Hungarian Medical Association is mighty upset, as he is even under normal circumstances, and is asking President Sólyom and the president of the Hungarian Academy of Sciences to set up an "independent committee" to look into whether it is necessary to ask for a loan from the IMF. The pensioners are not very happy either: they don't understand why the pensioners always have to sacrifice when they worked so hard all their lives. It is interesting to listen to people who call into talk shows. They built up the country after the war and after 1956 … and now what is happening to them? I'm not a heartless person but I would like to point out that the official retirement age is 62 and most of the pensioners retire before that age and therefore they couldn't possibly have built up the country after the war. Most likely not even after 1956. Perhaps their parents, but not them.  But it sounds good.

What would Fidesz do instead? According to Mihály Varga they wouldn't have turned to the IMF but would have taken the five billion euros from the European Central Bank and immediately given that money to Hungarian small and medium-sized businesses. In plain language, they would have enlarged Hungary's national debt by five billion euros. Somehow I don't think that the international business or banking community would be too thrilled with this solution. Another suggestion Varga somewhat reluctantly made was to halt infrastructure projects. They would stop building the metro in Budapest and expanding Hungarian superhighways. After all, some Hungarian highway projects were contracted out to non-Hungarian firms, and there's no reason to see money flow out of Hungary. But even these projects rely heavily on local businesses and their workers. Soon enough not only the 500 GE workers will be out of work but all those guys working on the highways. Plus the future development of such cities as Pécs would be jeopardized because of the lack of modern infrastructure reaching it and its environs.

Another gripe of Fidesz is that the government negotiated with the European Central Bank and the International Monetary Fund in "secret." They should have discussed everything with the parliamentary parties and only after agreement should have approached the two monetary institutions. The very idea is absurd. First of all, the government had to act immediately to stop the hemorrhaging. Second, if agreement had to be assured prior to negotiation I am absolutely certain that no such agreement could have been reached thanks to the customary Fidesz attitude toward compromise. In brief, Hungary could have ended up in  bankruptcy. But I guess this eventuality would have suited Viktor Orbán who then could have appeared as the savior of the country.

By the way, an interesting development. In the last two or three days two opinion polls were published: although Fidesz is still leading, both polls show a 6-7% gain for MSZP. SZDSZ and MDF are languishing at 1-2%.

The moderate Fidesz weekly: Heti Válasz

October 29, 2008 Comments off

The beginnings of Heti Válasz  were not exactly glorious. The Orbán government made every effort to establish a series of newspapers, weeklies, and radio stations committed to Fidesz and espousing its right-wing ideology. While most of the papers and electronic media were purchased by well-heeled Fidesz sympathizers with perhaps a small infusion of Fidesz money, Heti Válasz was financed solely by the government. That is, the taxpayers' money. First, the government gave a generous grant, perhaps even a billion forints, to a foundation that in turn established the weekly. The problem began with the name of the publication. The original plan was to call it simply Válasz (Answer), the same name as a famous liberal literary magazine established after the war. However, the children of the original owner and publisher of Válasz refused to allow the use of the name. I wasn't surprised. So it became Heti Válasz (Weekly Answer). The beginnings were rocky but then Gábor Borókai, government spokesman during the Orbán government, took over the job of running the paper. Under his stewardship the paper has been doing better financially. Whether it is doing a better job of reporting accurately is up for grabs. The latest incident shows that although Heti Válasz is better than the two right-wing dailies, Magyar Nemzet and Magyar Hírlap, there are still serious problems.

Péter Boross, former prime minister and the grand old man of MDF, is beside himself. Heti Válasz is publishing an article tomorrow entitled "Péter Boross pounced upon Ibolya Dávid." According to the article, Boross, a great friend of Ibolya Dávid, right after Dávid released the tape suggesting that Kornél Almássy was an "agent" of Fidesz, argued at an MDF meeting from which both Dávid and Almássy were absent that the two contenders should step down and give up the idea of running for the post of party leader. As far as I can recall, Boross in fact said at the time that under the circumstances when there was a possibility of early elections it would be a big mistake to have a change of leadership. Borókai is sticking by his guns: they are talking about another occasion. Someone present at the meeting attested to the veracity of this remark. Of course, there was only one piece of information that reached Heti Válasz. No confirmation but Hungarian newspapers are not too fussy. They hear something and immediately rush to print it. Fact checking is not exactly their strong suit. This is especially true when it comes to right-wing papers. If I had as many 100 dollar bills as Magyar Nemzet had to make corrections I would be a great deal richer than I am at the moment. However, they don't seem to learn. Or rather, I suspect, they don't care. Who is going to read the correction hidden in small type? But a juicy story, that's something else. That makes Magyar Nemzet's readers very happy: socialist parliamentary member X is building a luxury villa at Lake Balaton. Oops! The villa is being built on the next lot not belonging to X. Never mind!

Even from the brief synopsis of the full article that will be available only tomorrow it seems that there is a new Fidesz assault underway against MDF. Not only did Péter Boross "pounce upon Ibolya Dávid" but Heti Válasz "pounced upon" Zoltán Lengyel, the former Fidesz member who was booted out of the Fidesz caucus because of his rather checkered career including an investigation of his case of attacking policemen who stopped him in the dead of night half naked. (I wrote about the bizarre case on July 10, 2007. The title: "The gentleman driver.") In order to save the MDF caucus Lengyel had to be taken in. Well, Lengyel is bad enough news by himself, but for Heti Válasz he is not quite enough. All shady characters who ever belonged to the Smallholders' Party are being dragged into the story as proof of MDF's moral decay. Surely MDF is not being attacked because of the party's threat to Fidesz. At the latest polls MDF's share of the electorate is one percent. However, the same poll claims a seven percent growth of the MSZP electorate, and it looks as if MDF might support the government's "umbrella package." I have the strong suspicion that Heti Válasz's attack on MDF has more to do with the austerity program and MSZP-MDF relations than anything else.

The Hungarian “umbrella package”

October 28, 2008 Comments off

In 1995 we had the "Bokros package," named after the newly appointed minister of finance, Lajos Bokros. The prime minister at the time, Gyula Horn, was most reluctant to introduce the absolutely unavoidable austerity program that meant a drop in real wages of about 17%. The "Bokros package," although painful in the short run, resulted in healthy economic growth from 1997 until about 2000 when the Orbán government started the usual irresponsible spending because of the approaching elections. Although the government spent a lot of money trying to buy votes, Viktor Orbán and his party lost the election. Fidesz was not the only party to offer all sorts of goodies to the electorate. The other side, the socialists, did the same, and Péter Medgyessy, the new prime minister, made the mistake of actually fulfilling his extravagant promises. Not like Orbán in 1998 who promised all sorts of things before the elections but prudently didn't pony up.

As a result of misguided fiscal policy between 2000 and 2006 both the national debt and the budget deficit became unbearably high. In 2004 Hungary became a member of the European Union and therefore was no longer free to pursue irresponsible fiscal behavior. Hungary had to come up with a timetable for its deficit reduction program in order to receive financial assistance from the EU. It was obvious that a new "package" was needed. Unfortunately, this package was named the "Gyurcsány package." Not the best advertisement for an already beleaguered prime minister. Gyurcsány and his economic advisers figured that an austerity program at the beginning of the government's tenure would bring positive results by the time of the elections in 2010. The improved economic situation should benefit the government in power. Well, it didn't work out that way, and now we have the "umbrella package." At least this is the name the newly proposed austerity program got today.

The proposed "umbrella package" was devised in part to meet IMF requirements for Hungary to access its lending facility. The Hungarian government has promises of standby credit from the European Central Bank and the International Monetary Fund. The IMF credit (possibly 12.5 billion dollars) has strings attached. According to newspaper reports, Hungary must reduce its expenses by at least 300 billion forints. If that is the case, the Hungarian "sacrifice" is not overwhelming, especially if we recall that some Hungarian economists, among them the venerated Lajos Bokros, were talking about cutting 1,000 billion forints from the budget.

The announcement of the IMF rescue package bolstered investor sentiment. Today the Budapest stock exchange soared 9 percent. The forint has also become considerably stronger, presumably at least in part as a result of the recent interest rate increase by the central bank.

Fidesz and the Christian Democrats have very serious reservations about the IMF loan. After all, what a terrible fate. Hungary in the same company with Ukraine and Pakistan? A country that belongs to the European Union? It was a huge mistake, according to them, to even contemplate IMF help. Instead, Lajos Kósa of Fidesz suggested that the prime minister resign. Unless this happens, Fidesz will not cooperate with the government. Crisis or no crisis. It is very unlikely that Gyurcsány will listen to Kósa especially since it seems that SZDSZ and MDF will cooperate with MSZP, and therefore there will be plenty of votes to pass the "umbrella package."

So what's contained in this "umbrella package"?

(1) They will freeze the salaries of all ministers and undersecretaries. The salaries of board members in state-owned companies will be reduced by 10%. Managers of state companies will not get year-end bonuses. There will be new furniture purchases for government offices.

(2) Salaries of civil servants and state employees (doctors and teachers, for example) will be frozen at their nominal value in 2009 and they will not receive the customary extra month salary.

(3) With great reluctance the government will also make some adjustments in pensions. Although MDF wanted to suspend the extra month payment across the board, the government made only a modest cut. People who receive pensions but who have not yet reached the official retirement age (62) will not receive the extra month payment. People with higher than average pensions will receive the extra month's pension but it will be capped at the value of the average pension, which is 80,000 Ft.

Otherwise, the ministry of finance based its calculations on what it considers the worst possible scenario: a negative print on the GDP of 2% and a 2.6% budget deficit.

Of course, these are only the government's suggestions. What will come of the package depends on further negotiations. As things stand now, I don't think that one can count on the assistance of Fidesz and the Christian Democrats; it is not in their interest to lend a helping hand to the MSZP government. They simply say that this whole mess is the government's fault and that the government will have to solve the problem it created. But they are against any of the cuts suggested by the government. They stick with their idea that the best way of handling the situation is to introduce massive tax cuts. I don't think that I have to emphasize the absurdity of this suggestion.

Ottokár Prohászka and antisemitism

October 26, 2008 3 comments

There is a new controversy surrounding the unveiling of a bust of Ottokár Prohászka (1858-1927), bishop of Székesfehérvár between 1905 and his death. Or rather it wasn't so much the unveiling of the bust that ruffled liberal nerves but the speeches delivered on the occasion by two Fidesz parliamentary  members, Sándor Lezsák and Zoltán Balog.

Let me introduce the cast of characters. First and foremost the controversial bishop. As one can easily detect, Prohászka's fervent Hungarian patriotism didn't have much to do with his lineage. His father still spelled his name in its original Czech form, Prochaska, although apparently the family was already German-speaking, making its home in Moravia. Dominick Prochaska was an army officer in the imperial army and in 1857 was sent to Pozsony (Bratislava) to serve as a lieutenant. Here he met his future wife, Anna Maria Filberger of Nyitra (Nitra), whose ancestors came from Switzerland; again, the language at home was German. Why the son was named Ottokár, a very typical Czech name, is not clear. Young Ottokár decided to become a priest early in life and there is no question that he was a talented man. After his death his collected works were published in twenty-five volumes. (By the way, available on the Internet:  http://gondola.hu/cikkek/59632He early became enamored with Christian socialism and wanted to modernize the Catholic church. The Church was not too taken with his efforts, and three of his books ended up on the papal index. After his death some of his admirers wanted to begin proceedings for his eventual sainthood, but the Church made sure that this wouldn't happen.

So he was controversial within the Catholic church and he is equally controversial outside of the church. Mostly because of his vicious antisemitism. According to most historians Prohászka's "modern" antisemitism made a real impact on the thinking of the Hungarian middle class between the two world wars. Prohászka's political views and antisemitism were based on his belief that modernity, capitalism, and the Jews are an integral part of the whole. He hated modernity, he hated capitalism, and therefore he hated the Jews. He claimed as early 1893 that for him antisemitism wasn't based on race or religion; it was a social and commercial "problem." He added: "the ulcer that is the Jewry has been gnawing at the corpus of Christian Hungarians." Even after many years, just a few years before his death, he still claimed that "Jewish ritual butchers want to shed the blood of Hungarians." The good Christian prelate used such words in connection with Jews as "perverse, cunning, immoral," he spoke of an "invasion of bed bugs, invasion of rats." And he asked: "How can we defend ourselves?" This is the man who is greatly venerated in Catholic circles today. There are several schools named after him. He already has a statue in Székesfehérvár. And now the new bronze bust in Lakitelek, at the birthplace of MDF (Magyar Demokrata Fórum).

About Lakitelek. Sándor Lezsák, a minor Hungarian poet, was one of the organizers of a meeting of Hungarian intellectuals to discuss the future of the country at the time when the collapse of the Kádár regime seemed imminent. Lezsák offered his backyard for the gathering. Since then Lezsák has left MDF and moved over to Fidesz where he and his fellow former MDF members of parliament established a group called Nemzeti Fórum (National Forum), a much more radical group than the majority of Fidesz members in parliament. Lezsák during the Orbán government managed to get a tidy sum of money in the form of a loan never to be repaid to build an academy of sorts. There over the years he has erected a "Christian Pantheon." Prohászka is the eighth member of the illustrious group. The others are also prominent conservative luminaries of the Horthy regime: Miklós Horthy himself, József Mindszenty, László Ravasz (a Hungarian Reformed bishop, member of the Upper House who voted for the anti-Jewish laws), Áron Márton (Catholic bishop of Transylvania), Lajos Ordass (Lutheran bishop), and Kuno Klebelsberg (conservative politician in the Horthy regime).

Zoltán Balog is a Hungarian Reformed minister who became a member of parliament only two years ago. However, he has been an "advisor on matters of theology and relations with churches" to Fidesz and also the former president of the republic, Ferenc Mádl. Apparently he is the spiritual advisor of Viktor Orbán. I assume he is the one who helps the formerly atheist Orbán find biblical themes for some of his speeches.

Both Lezsák and Balog said things at the unveiling that were inappropriate. Lezsák talked about the "spiritual terror" of a certain group the Hungarian people must suffer. He applauded Prohászka's stance against "cosmopolitan parasites." According to Balog "there is a need for the defense of the Christian faith because if we let it be taken away from us then we Hungarians will survive only in the biological sense." The reaction was immediate: Péter Gusztos, a young liberal deputy, in parliament called attention to the "outrageous speeches" made at the unveiling and accused the two Fidesz members of parliament of again courting the far right. Some of the leaders of the National Democratic Charta also expressed  their dismay and demanded that Fidesz recall the two members. Of course, that is not going to happen.

One may say that this is a storm in a teacup. For a few days we will hear a lot about Prohászka as we have been hearing about another favorite of Fidesz, Albert Wass, a Transylvanian writer of dubious talent, who was also honored with a bust in Debrecen. He died in the United States and was an energetic antisemite with a long career in different far-right Hungarian emigré publications. By themselves perhaps these cases are not terribly important, but unfortunately they signify a considerable shift to the right within Fidesz itself.

A glimpse into the past: the presiding judge at the Imre Nagy trial

October 25, 2008 Comments off

Around national holidays it is customary to air programs that shed light on the significance of the date. October 23 is no exception, and in the last few days we had an opportunity to listen to interviews with historians and participants in those events 52 years ago. There was an interview with the granddaughter of Imre Nagy, with the son of László Rajk who was executed on trumped-up charges in 1949, and with Imre Mécs, currently a member of parliament who was originally condemned to death but whose sentence was on appeal changed to life imprisonment.

There is a weekly program on MTV (the Hungarian non-commercial public television) called "Múlt-kor." The title has a double meaning: "past" and "the other day." Not suprisingly the topic this week had something to do with 1956. Specifically, with the Imre Nagy trial and its presiding judge who condemned four of the nine accused to death. It was one of the fastest trials ever: the whole thing was over in a week. There was no appeal, and the execution took place a few hours after the trial ended. The judge's name was Ferenc Vida. He died only in 1990, that is after the the collapse of the Kádár regime and more than a year after the reburial of his victims. Vida never regretted his decision, denied till the end that he received instructions from Kádár, and was convinced that Imre Nagy and his friends were traitors who received their just reward.

Who was Ferenc Vida? He was born in the provincial town of Csongrád which then, in 1911, had a population of 25,000. His father was a well-heeled lawyer. He himself finished law school in 1933, a year after becoming one of the organizers of the rather weak Hungarian Zionist movement. After graduation he emigrated to Palestine where in 1934 he joined the Palestine Communist Party. He didn't last long in Tel Aviv. In 1935 he returned to Hungary, took the necessary exams to become a lawyer, and meanwhile was active in the illegal communist party. In 1942 he received a life sentence in a military court proceeding because of his illegal activities. Between 1942 and 1944 he was incarcerated in various Hungarian jails but eventually was taken to Germany where he was sent to one of the death camps. After returning to Hungary in 1945 he continued his law practice for a few months and immediately joined the MKP (Magyar Kommunista Párt). His past was appreciated, and he quickly moved into important positions. He became the party secretary of District V and later a high official in the Ministry of Interior which was in communist hands in the coalition government. From the Ministry of Interior he moved over to the Ministry of Justice, and although his legal career was anything but illustrious he was appointed a judge on the Supreme Court in 1953. He retired in 1972 at the age of 61.

Apparently by 1989 Vida was worried about what might happen to him after the change of regime. Around the time of Imre Nagy's reburial he left Budapest and stayed in a friend's villa at Lake Balaton. Once he realized that there would be no retribution, he returned to the capital where he had a nice long interview with a journalist.

"Múlt-kor" played segments of this interview as well as parts of the original tape recording of the actual trial that was made available a few months ago on CD. The commentators were well known historians of the period who provided background information on Vida, on the trial, and on Vida's career in his later years. Vida conducted the proceedings not so much as a judge but rather as a prosecutor. He later in the interview claimed that he never yelled at the accused but one can hear him scream at both the defense lawyers and his victims. In the interview before his death in a sickeningly pious voice he admitted that he may have made mistakes, but he was following the law to the best of his knowledge. This was not so. He broke the law left and right. For example, he didn't allow the testimony of certain witnesses, he struck out lines from the transcript that he didn't like–for example, a reference to the fact that János Kádár was also a signatory to the declaration of Hungary's neutrality.

I highly recommend listening to Vida's voice. I found it frightening. One doesn't even have to know Hungarian to shudder at hearing him speak. The program can be seen here: http://tinyurl.com/6yvhz4

 

After the national holiday

October 24, 2008 Comments off

Poor October 23, 1956. For thirty-three years one couldn't even talk about the events of those thirteen days that shook the Kremlin, to borrow the title of Tibor Meray's book about Imre Nagy and the revolution published in 1959. In fact, the silence of those years was deafening. It was not without reason that Péter György, a literary historian, called his book about the afterlife of the revolution during the Kádár regime Néma hagyomány (2000) [Silent heritage]. Only this morning Imre Mécs, one of the student leaders of the revolution and today a respected member of parliament (MSZP), mentioned that he is often invited by schools to talk about the revolution to the students. His first question always is: "Did you hear about the revolution at home?" Normally only five percent or so of the students heard about 1956 from their parents or grandparents.

What is even more surprising or puzzling is that even those Hungarians who were adults at the time later showed signs of total amnesia about 1956 and its aftermath. When talking to people of my parents' age who were in their forties between 1956 and 1963 I was astonished to hear that these people didn't remember the first few years of reprisals, the 20,000 arrests, the about 300 death sentences and the many thousands who spent years in jail and whose lives were totally destroyed as a result. As if none of this ever happened. Perhaps most shocking was that nice, middle-class ladies in their seventies told me that "only those were punished who deserved punishment."

In today's interview Imre Mécs recalled a course he gave at his alma mater, the Budapest Engineering School. He discovered that it was not enough to talk about the events that preceded the outbreak of the revolution; he had to give a kind of glossary of terms. The students seemed to be totally ignorant not only of the revolution and its immediate prehistory but according to Mécs of Hungarian history from about 1914 on. Most likely in the twelfth grade they simply ran out of time. The teacher was happy to get to the outbreak of World War I. That's too bad and perhaps explains a lot about today's youth and their political views.

Anyway, for thirty odd years one either didn't want to or didn't dare to speak about the revolution. The textbooks called it a "counterrevolution," and in fact that stuck to such an extent that even in the mid-1990s almost half of the population considered it a counterrevolution. I don't think that this is very surprising. After all a whole generation grew up during those years. Most parents didn't dare tell their children about the revolution because they were afraid that the children would say something in school that might have untoward consequences. Thus the best thing was to say nothing.

And then came October 23, 1989 when the day became an official national holiday and when the Third Republic was born. The beginnings of a new democratic regime. It sounded so idyllic. But soon enough it became obvious that the nation was divided over the meaning of the revolution. I'm not sure when it became customary for different parties to celebrate national holidays at different times and in different places. If I had to guess, I would say that it was during the Horn government when the opposition party refused to celebrate with the former communist Gyula Horn who was a participant in the revolution but unfortunately on the "wrong" side. I still remember the total shock when Gyula Horn together with the widow of Imre Nagy laid a wreath on Imre Nagy's grave or statue. Again, I'm not sure what happened during the Orbán government's tenure in office (1998-2002). But I do know that since then Fidesz has refused to take part in the official government functions. Mind you, this is true not only of October 23 but also of March 15 and August 20. On October 23 the left goes to the modern and quite stunning 56 Memorial while the right, who managed to get its own much more traditional statue on the other side of the Danube, gather there. While the left says that the Hungarian revolution of 1956 was inspired by the reform communists, the right claims that it was an anticommunist uprising pure and simple and that the real aim was the establishment of a bourgeois democracy and a market economy. The fact of the matter is that two weeks was not enough time to develop any long-term plans for the future. Some people wanted a reformed socialist system while others wanted a multi-party democracy.

Ferenc Gyurcsány in his speech yesterday at the Opera House talked about "our common treasure." The revolution is ours, the whole nation's. Neither side can lay exclusive claim to it. Unfortunately, Viktor Orbán's speech given in Buda in the old Castle section of the city sent a different message. He portrayed today's regime as a dictatorship somewhat similar to the Rákosi period. In today's dictatorship Imre Nagy would be beaten if he wanted to visit Kossuth Square, and "this poor, humiliated people can be grateful that they are not sent to Recsk." Oh yes, I had to think of Imre Mécs's glossary where surely he had to explain to his students what Recsk was. Recsk was a labor camp, the Hungarian gulag that existed between 1950 and 1953. Few people got out of Recsk alive. Today Recsk is a happy little village in northern Hungary; its home page invites people to a big Halloween party on November 15th. Orbán's absolute nonsense was greatly appreciated by an enthusiastic crowd of thousands. Whenever I hear such wild utterances I have to wonder whether the audience has any idea of what Recsk was and how absurd this statement is.

At least Orbán's fiery speech didn't have much effect on those who in the past two years managed to ruin the holiday and inflict substantial property damage. The Hungarian police made an incredible discovery: it is better to surround suspicious groups instead of chasing them halfway across town!  There were some guys who were prepared to wreak havoc, and they had everything ready: masks, knives, Molotov cocktails, bombs. But once the police surrounded them they dropped everything. The streets were littered with all sorts of weapons. As a result there was no disturbance in Budapest. The country survived without yet another embarrassment. I think that beside better police work Orbán's decision not to hold a huge rally in front of the downtown Astoria Hotel certainly helped the situation.

Political manipulation in Hungary?

October 22, 2008 5 comments

Someone wanting to follow Hungarian politics through the English-language foreign press is in real trouble. I receive a Google service that alerts me to items in Google News about Hungary and anything Hungarian. When it comes to "Hungarian," beside Hungarian Spectrum one usually finds recipes for Hungarian goulash! (There are a number of English-language internet sites originating in Budapest that report on political and economic events in Hungary. They help to fill the void.) In the foreign press the silence is deafening–except if there is trouble. Right now it is bonanza time because there is big trouble. For example, CNBC's truck is parked in front of the Hungarian parliament and CNBC gives hourly updates on the Hungarian situation. No wonder: the situation is volatile. For anyone interested in CNBC's latest report and the accompanying video on which András Simor, governor of the Hungarian National Bank, is being interviewed here's the link: ttp://www.cnbc.com/id/27317280

Far more provocative is an article that appeared in The Washington Post by Anne Applebaum, an experienced foreign correspondent for such British publications as the Economist, the Spectator, and The Evening Standard. She spent a lot of time in Eastern Europe and wrote a book about the region: "Between East and West: Across the Borderlands of Europe" (1995). She received the Pulitzer Prize for non-fiction in 2004 for her book "Gulag: A History" (2003). She writes a weekly column in The Washington Post. This week's column absolutely shook Hungary, not without reason.

The title of the piece is "The Iceland Syndrome." It begins by describing what happened in Poland. The largest bank in the country is Italian-owned and is doing well. The parent bank in Italy is doing less well, and a certain amount of money was transferred from the Polish subsidiary to Italy. This matter was reported "in a marginal, far-right newspaper in somewhat different terms: 'A billion dollars transferred to Italy! [The country's] hard-earned money going abroad!' Within hours, as if on cue, everyone started selling shares in [the bank] whose stock price plunged. So did the rest of the country's smallish stock market. So did the country's currency." Oh, yes, that can be Hungary too, the reader familiar with the Hungarian scene thinks. In fact, Applebaum mentions that such a scenario happened in several other countries in Europe.

Applebaum discounts most official explanations of the current crises: Hungary's finances were long mismanaged or Ukraine is not well governed. "The speed with which some of these defaults are happening, coupled with the paranoia inherent in the political culture of small countries, has led many to suspect political manipulation as well." According to Applebaum: "If you wanted to destabilize a country, wouldn't this be an excellent time to do it? If [a country]'s stock market can crash after the publication of a single article in an obscure newspaper, think what might happen if someone conducted a systematic campaign against [a country.]"

Applebaum continues: "All governments have enemies, internal and external, or at least are faced with elements that do not wish them well: the political opposition, the country next door, the former imperial power. For someone, there will always be the temptation to bring down the government, destabilize the country and thus create political chaos." I think a lot of Hungarians have been suspecting something like that for some time. It was discovered that the comparison between Hungary and Iceland first appeared in a blog written by a Czech Ph.D. student whose field is physics. A day later an obscure Viennese paper published by the city picked up the idea. The following day the news could be found on the homepage of Fidesz. From there it spread to forty some, mostly right-wing papers and television stations.

Today, Olga Kálmán, a political reporter for ATV, asked Ferenc Gyurcsány what he thought of Applebaum's proposition. He was, of course, very careful, but at the end he said, "It is not impossible." One thing is sure: ever since Ferenc Gyurcsány appeared on the political scene in 2004, Orbán has had a single overarching desire: to get rid of Gyurcsány whom he considers his only worthy political rival. But as Gyurcsány said to Kálmán: Orbán can't circumvent me; he'll have to confront me head on. And only the voters will decide.

Economists on the Hungarian financial crisis

October 21, 2008 5 comments

While Viktor Orbán was visiting the Budapest Stock Exchange today where he was apparently conferring with the leaders of the BUX, three economists got up early in the morning to talk to a reporter of Napkelte, the early morning political program (MTV). Listening to them it became even more obvious how little relevance Orbán's pronouncements have given the current economic reality. All his speeches dealing with economic matters have a hollow sound. As one listens to them one wonders whether he understands what's going on or whether his own propaganda seduces him. Hard to tell. However, one thing is sure: politically speaking it is an attractive message to everyman. The people on top, the rich and the powerful, cheated, lied, and stole, and they ruined the country. They are making the little people pay for their sins. Whether this message will resonate or not is difficult to tell. It seems that the Hungarian people, although relatively ignorant of the workings of the capitalist system, are aware of the real nature of the crisis. They might not know all the ins and outs of how subprime mortages in the United States ended up wreaking havoc all over the world, but they seem to comprehend that the crisis is international and that the financial crisis will most likely be followed by a recession. They also understand that this will mean higher unemployment and slower or negative growth. In brief, hardship.

Meanwhile out there in the real world things don't look too good. OTP again lost about 10% of its market cap, the forint fell again, and the BUX closed in negative territory. The BUX is down about 50% year to date. Meanwhile some very irresponsible utterances can be heard and read in the media. The comparison with Iceland crops up far too often when in fact the two countries' situations are not at all similar. Orbán and Fidesz love to point out that Hungary is faring the worst in the region. All other countries are doing much better. Irresponsible talk can be heard about the bankruptcy of the state itself. As long as these politically motivated announcements are for internal consumption only all is well; no great harm will result. But the world is very small nowadays and these irresponsible utterances might only exacerbate the flight to safety–far, far away from Hungary.

There is certainly no need for panic. The situation is serious but not worse than in some other countries. This is what three well respected economists, Éva Palócz, Mihály Kupa, and András Vértes, were talking about this morning. As opposed to the common wisdom that the Hungarian stock exchange is out of sync with the stock exchanges in the region it is moving more or less in tandem. Yes, the national debt is high but in Europe this is considered to be average: 66%. Some people look at the performance of the stock exchange over a few days and draw hasty conclusions. Yes, in the last few days the BUX didn't do well, most likely because of the losses suffered by OTP. According to Kupa OTP's stock was overvalued and this added to its current problems. Otherwise, the bank's fundamentals are fine. (A footnote here to Kupa's take on OTP. During the financial meltdown virtually no stock in any international market traded on fundamentals. Overvalued, undervalued, didn't matter. It got sold. Some sectors got hit harder than others–financials a lot more than consumer staples. A simple rationale: the bank may go belly up and equity holders will be wiped out. But we'll all need to buy toilet paper. As the bond market starts to stabilize, slowly and tentatively the American market is returning to normalcy, where earnings matter. The market may not rally, but at least it's not held hostage to things outside its sphere of competence. That is, it's now focusing on recessionary concerns rather than credit concerns.) The economists called for calm and patience in dealing with the BUX. Sooner or later, most likely sooner, things will settle down. As for the forint, it was kept artificially high for years during the tenure of Zsigmond Járai as chairman of the National Bank.

The reporter wanted to find out why Hungary has lost the trust of investors and the financial community in general. The three economists agreed that the problem was that between 2001 and 2006 Hungary never managed to fulfill any of its projections. The government promised a deficit X and at the end it turned out to be X+Y. The international community was actually very patient but eventually it lost trust in the Hungarian government's promises. It's true that in the last two years the Gyurcsány government's performance was spectacular when it came to reducing the deficit, but it is very difficult to regain confidence once lost. Hungary was also just very unlucky. As György Surányi, former chairman of the Hungarian National Bank, said at the National Summit: "The ship didn't reach the harbor before the storm." The Hungarian government would have needed a couple of more years to show the results of the responsible fiscal policy of the first two years of the second Gyurcsány government. This was the plan. It didn't turn out that way.

The economists agreed that at the moment there cannot be any tax cuts. Éva Palócz advocated tax reform but Mihály Kupa wasn't even sure whether changing the tax code again was the best idea. One needs calm and one of the problems in the past was the constant changes in the tax code. Éva Palócz wanted to see greater savings in the proposed budget just released. She missed "structural changes" as well. András Vértes, I think rightly, pointed out that if the budget is too restrictive it might deepen the possible recession. Obivously, there are no easy solutions. Which might be good for one thing might be harmful in another respect.

While Orbán keeps repeating his refusal to cooperate with this prime minister, Fidesz and the Christian Democrats accepted an invitation by SZDSZ and MDF to a five-party meeting for tomorrow. Indeed, I don't think that Orbán's party has another option. It is becoming quite clear that SZDSZ and MDF will most likely cooperate with the government and will make sure that the 2009 budget is passed. They feel the need for political cooperation in the midst of a financial and economic crisis. Therefore for the time being it really doesn't matter what Fidesz does. The government will survive. Let's hope that they will be able to handle the crisis without dire consequences.

Local government Hungarian style

October 20, 2008 5 comments

In Hungary there are 3,175 local governments, thirteen times more than in Sweden. While New York with a population of over eight million has five boroughs, Budapest with less than two million people has twenty-three districts. Each district (kerület) has its own mayor and deputy mayor. There is, of course, the mayor of city (főpolgármester), Gábor Demszky, who has occupied this post since 1990. He also has several deputies (alpolgármesterek). The chaos in Budapest is monumental: different parking rules in different districts, different local taxes depending on which district one lives in, for some streets the district is responsible while others belong to the center. Some buildings or lots are owned by the districts, some are under the jurisdiction of Budapest's central government. Each district has its local council, and the center also has a governing body. I hate to think how many people work for just the city of Budapest. Far too many. Apparently there is one local government employee for every thirty-one Hungarian citizens. Every little village, some of them with only a few hundred inhabitants, has a functioning local government although the next village with a similar number of inhabitants might be just down the road, about two or three kilometers away.

Péter Róna, an American trained economist and investment banker, talked about the incredible waste of this system. Gábor Demszky who, I'm sure, is sick and tired of his twenty-three little district mayors, seconded it and said that he was sure the Hungarian system of local governments could be entered in the Guiness Book of World Records. In 1990 the "founding fathers of democracy" believed that real democracy should be based on local governance and initiative. I'm sure that this is a good idea, but they went a bit overboard with the numbers. Running the 3,175 local government costs 3,500 billion forints a year. This figure doesn't include the rather large debt load local governments carry. Forty percent of the cost of running these local governments comes from the central budget. The rest from other sources. For example, most of the hospitals are owned by the local governments but their expenses are covered by the central Health Fund. Out of the  3,175 local governments just last year 700 were in financial trouble. Or, less politely said, they would have been bankrupt without the helping hand of the central government. Twice a year a local government can turn to the central government and explain that they are in trouble due to no fault of their own. Just last year 8 billion forints were paid out to local governments in financial straits.

Then there are those who issue bonds and try to raise money that way. The debt load of these towns is 488 billion forints. When the Hungarian national debt is calculated, the debt of local governments is not included in the total. Some of the money received from issuing bonds is spent not on infrastructure but on the daily running of the local institutions. Often, the local governments can't function well because both the mayor and the council members are elected by popular vote on the basis of party affiliation. So it can easily happen that the mayor belongs to one party while the majority of council members belongs to another. Cooperation becomes difficult and in some cases impossible.

Fifty-five percent of all local governments serve fewer than 1,000 people, 75 percent fewer than 2,000 and 91.5 percent fewer than 5,000 people. The cost just to run "town hall" is 2,400 billion forints. That includes salaries, building maintenance, heating and electricity, official cars, etc. Apparently every Hungarian citizen pays about 631,000 forints yearly for the services of his or her local government. That is about $3,200. (And for those in the U.S. who see the lion's share of their local taxes go to education, that's not the case in Hungary. The central government pays.) Incredible. Moreover, the whole system as it functions right now is not only very expensive but also a "hotbed of corruption" as Péter Róna called it.

Róna at the National Summit claimed that 1,000 billion forints could be saved by reforming the whole system. Not every little burg has to have a town hall, a mayor, a whole slew of clerks. Fidesz won't hear of any change because most of the local governments are in Fidesz hands. The government made several attempts at reform but since such a change demands a two-thirds majority, without Fidesz support nothing can be done. Moreover, not everybody is in favor of reform. One doesn't have to be a local representative of Fidesz. The person easily can belong to MSZP or SZDSZ. Because, after all, the twenty-three district mayors and district deputy mayors who would lose their jobs are not going to be terribly enthusiastic. Erzsébet Gy. Németh (MSZP) who has been active in Budapest local government and at one point ran unsuccessfully for mayor sure didn't like Róna's suggestion. She was also present at the National Summit and contended that "running local governments" doesn't cost as much as Róna claims and therefore there is no way that the country can save 1,000 billion forints by reforming the system. Maybe not, but I'm sure the savings would be huge. 

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