Month: November 2011

Viktor Orbán’s vision of the international financial world

There has been a lot of speculation in the last year or so about who really is in charge in Hungary when it comes to economic policy. Or, perhaps better put, who influences whom? Was it Economic Minister György Matolcsy’s vision that captivated Prime Minister Viktor Orbán who, as he himself admits, knows mighty little about economics and finance or is Matolcsy merely a willing tool in the hands of the “visionary,” Viktor Orbán? In either case, the situation is pretty bad.

I am inclined to believe that the prime actor in this sorry affair is Viktor Orbán himself and that he picked György Matolcsy as his “right-hand” because Matolcsy supplies him with the kinds of ideas that he himself likes to hear. It is a symbiotic relationship. It is therefore unlikely, for a while at least, that Orbán would relieve Matolcsy of his responsibilities due to pressure at home and from abroad. It is true that today we received the news that the Hungarian delegation that will negotiate with the International Monetary Fund and the European Union will be headed by Tamás Fellegi, minister in charge of economic development, but Matolcsy himself is still holding on to his job.

Although the country’s financial situation reached a point that forced the Orbán government to turn to the IMF, government communication hasn’t changed at all. The unorthodox methods that were supposed to save the country still seem to be valid. According to government propaganda, the fundamentals of the Hungarian economy remain sound. The credit rating agencies are out to get Hungary and so are the “speculators” who attacked the Hungarian forint. And naturally, the Hungarian government will wage war against the enemies of the country. Members of the government as well as the official spokesmen emphasize how tough the Hungarian delegation will be and how they will defend Hungary’s sovereignty. A long laundry list follows such announcements that tells the faithful followers of Fidesz the points on which they will not budge. All this while everybody knows that Hungary has no choice. If they want financial help they will have to follow the IMF’s conditions for a loan.

Most commentators claim that this rhetoric is for internal consumption only. Home politics demand such communication tactics. After all, in the last eighteen months there were many instances in which the government said one thing at home and its very opposite abroad. Or, that one set of figures was released in Hungarian-language documents and another set in the English-language versions. Most likely, this is also the case now.

But I’m coming to the conclusion that this belligerent communication in fact reflects the ideas and attitudes of Viktor Orbán himself. It is not just politics. According to the composite picture one is getting from different informants, Orbán truly believes that his economic ideas are superior to those orthodox textbook solutions others use. He seems to be the captive of his own propaganda in which he himself by now wholeheartedly believes. For example, he has repeated so often that a close cooperation of the East European countries with Hungary as its center will be “the engine of European recovery” that it is impossible that it is just empty talk. The same holds true, I believe, when it comes to “the Eastern winds.” By now I think he truly believes that he is more clever and wiser than his fellow politicians west of Hungary. As one of the informants told HVG, “Viktor is convinced that the majority of European politicians are dim-witted [korlátolt] and are afraid to make decisions and resort to traditional political methods.” According to the same source, Orbán made no secret of his opinions and told his colleagues at international meetings what he thinks of them. Now, Orbán is convinced that these people are turning against him and through his person against Hungary.

At his meeting with the eleven economists at least some of the participants tried to convince Orbán that the reason for Hungary’s current financial troubles is not the result of some international conspiracy against Hungary; it is simply how financial markets work. They didn’t succeed. “He still thinks that two weeks ago an attack of speculators was launched against Hungary. Moreover, he is convinced that international financial circles and international organizations he offended with his economic policies are taking revenge on the country.”

It is possible that it is Viktor Orbán who is dim-witted unless the eleven overly friendly economists did not use strong enough language with the prime minister. Here is a picture taken at the meeting. It looks too lighthearted given the seriousness of the situation.

Károly Szász in the middle, Zsigmond Járai and György Szapáry to his right

Perhaps they were not as forceful as András Simor, governor of the Hungarian Central Bank, who referred to “some” people who talk about a speculative attack but “when it comes to credibility and economic fundamentals [Hungary is not Vitali Klitschko] but a punching bag.” And as far as the word “speculation” is concerned Simor gave a lesson in linguistics: “I would call attention to the thesaurus which provides synonyms to the word ‘speculate’–to think, contemplate, muse, ruminate, reflect on.” He pointed out that anyone “who has savings must speculate–think about–what to invest in; for the short or long term, into foreign currency or into bonds.” No wonder that Viktor Orbán doesn’t want to hear what András Sinor has to say. In fact, if it depended on the prime minister, Sinor wouldn’t be the governor of the central bank today. He prefers those smiling guys above.

The price? High. A government politician observed that he couldn’t tell whether Matolcsy is sticking with the notion of a speculative attack against Hungary out of conviction or because of his loyalty to Viktor Orbán. On the other hand, Viktor Orbán is totally convinced! The delegation, according to this informant, will be instructed to negotiate very hard and to go the last yard. The question is whether the IMF and the EU will be in the mood to haggle with the Hungarian delegation that is getting its instructions from a man who sees the world through very peculiar glasses.


An eyewitness account: October 1956, Part II

It seems that we are back at 1956 as a result of our discussion about the Orbán government’s removal of Imre Nagy from the national pantheon. I wanted to answer some of the comments, but TypePad decided that the owner of the blog is not allowed to post any comments. I do hope that they will come up with some solution to the problem that has been persistent ever since yesterday.

In my last note on the subject I described the constant bombardment we were under for days on end–the lack of food, heat, and electricity, but I forgot to tell about a memorable night alone in that huge building that used to house the Pannonia Hotel. At one point a rumor was circulating that the Soviets had had enough of the continuous fighting and that they will bomb the city. Total panic set in and we were ordered to move down to the cellar. So, the mattresses that had been dragged out from the rooms to the corridors were now moved underground. As soon as I saw the place I had uneasy feelings. Dirt floor, low ceilings with seemingly miles and miles of gas pipes. Eventually we settled down when I felt something hard under my seat. What on earth is this? It was a rucksack and in the rucksack was a hand grenade. That was the last straw as far as I was concerned. I announced that I don’t know what the others are doing, but I’m going upstairs and sleep in my own bed. If I have to die, it will be much better on the third floor than in the cellar.

Rákóczi út 5 — In 1956 Ilona Zrínyi Kollégium

As soon as I started going up on the majestic staircase my courage began to wane, but eventually I reached my room. It was an eerie feeling to be alone in this huge building, and I must say that I was a bit scared. However, I fell asleep soon enough and slept soundly. The same couldn’t be said of those, including my roommate, who sat all night in the cellar and staggered up to their rooms the next morning.

Throughout this first week we were in total darkness about the overall situation. There were occasional announcements on the radio calling on people to put down their arms but no one listened. At last, on Sunday (October 28) morning we heard that at the Law School, not too far from us, some kind of political gathering was taking place. A friend of mine, Teri K., and I set out to look around. The information turned out to be correct: the Revolutionary Committee of the Hungarian Intelligentsia (Magyar Értelmiség Forradalmi Bizottsága) was being launched. The committee was a kind of umbrella organization for some of the most important oppositional groups, like the Writers’ Association (Írószövetség), the Petőfi Circle (Petőfi Kör), and the  Revolutionary Committee of University Students (Egyetemi Forradalmi Diákbizottság). The big lecture hall was full of people. We happened upon a planning session about what the opposition should do under the circumstances. I remember most vividly Géza Losonczy’s speech complaining about the lack of resoluteness on the part of Imre Nagy. Losonczy died in prison at the end of 1957. Apparently, he went on a hunger strike. He was scheduled to stand trial, but he died when his jailers carelessly pushed a feeding tube down his windpipe. He was one of those who were reburied on June 16, 1989, alongside Imre Nagy.

It was here that I learned that the day before the Revolutionary Committee of University Students had been formed in the building of the Faculty of Arts under the leadership of István Pozsár and János Varga. Pozsár was a teaching assistant at the time and János Varga, assistant dean. I knew Varga well because he was the boyfriend of a student in my dormitory. So, as soon as we heard about the existence of the revolutionary student committee, we set out to visit the group at the Faculty of Arts–that is, our own university. In no time we received membership cards stating that we were acting in the name of the Revolutionary Student Committee. Half an hour later we were sent with two other students to Győr to negotiate with the revolutionary council of the city. In the intervening years I forgot the names of the other two students, but since then I found out while reading a book about the revolution at ELTE’s Faculty of Arts that one of them was Béla Pomogáts, today a literary historian dealing mostly with Hungarian literature in the neighboring countries.

The two boys went to talk to Attila Szigethy, who was the leader of the revolutionaries in Győr. (Szigethy committed suicide in February 1957 before his case reached the courts.) Teri and I ended up at the Győr Radio Station where we gave an interview about the situation in Hungary. In the interview we gave a very optimistic description of the developments in Budapest. After all, in the early afternoon Imre Nagy had announced the end of one-party rule. What of course we didn’t know was that it was at about this time that some of participants in the street fights attacked the party headquarters on Köztársaság tér (today, after Mayor István Tarlós’s street-naming spree, II. János Pál tér) and lynched several people.

The next day we were ordered to go to Pécs. On the one hand, our committee wanted to get in touch with the students at Pécs and, on the other, we were supposed to talk with the workers of the coal mines scattered around the city. We were supposed to convince them to return to work and support the Imre Nagy government. One reason I was eager to go to Pécs was because I hadn’t been able to get in touch with my parents since the outbreak of the revolution. So, Teri and I showed up at my parents’ apartment to my parents’ great relief and joy. We had the luxury of a bath and a nice dinner. After almost a whole week of very limited opportunities to eat and clean ourselves these were welcome events.

To be continued.

Now Imre Nagy is removed from the Hungarian national pantheon

While Viktor Orbán and György Matolcsy try to figure out what on earth to do before Hungary's finances collapse let's return to the Hungarian Revolution of 1956.

Historians and political analysts have often explained that although those who took part in the regime change between 1988 and 1990 appealed to the traditions of 1956 and in fact the Third Republic was declared on October 23, 1989, the fact is that the influence of 1956 is practically nonexistent in today's Hungary. In 1956 the intellectual leaders of the revolution were dreaming of some kind of socialist democracy. In practical terms they had the Yugoslav model in mind, such as factories actually run by the workers. Surely, this idea was no more than utopianism. In 1956, again following the Yugoslav example and taking their cue from Austria's status, the intellectuals of 1956 envisioned a neutral state that would be a guarantee for the Soviet Union that the new socialist Hungary wouldn't be antagonistic toward its eastern neighbor. The coat-of-arms those people had in mind was the Kossuth coat-of-arms.

In 1990 Hungary became a state committed to the free market economy or, more plainly, to the capitalist system. Gyula Horn, the leader of the new socialist party, announced at the very beginning of 1990 that Hungary should join NATO. Even the sacred symbol of 1956, the Kossuth coat-of-arms, was cast aside and the old one with the crown on top reestablished. Today's Hungary has practically nothing to do with 1956.

Yet at least in words all politicians appeal to 1956 as the prime example of Hungarians' desire for freedom and democracy. Viktor Orbán made himself a well known public figure by being chosen to speak at the reburial of Imre Nagy and the other martyrs of the revolution on June 16, 1989. What did he say in that speech about Imre Nagy and the other "communists" whose remains had been collected in the coffins displayed on Heroes' Square? He bowed "in front of the communist Imre Nagy and his friends" for two reasons. He respected the fact that these people could identify with the will of Hungarian society and that, even in the shadow of the gallows, they refused to stand together with the murderers. According to the Orbán of those days "we could learn from their fate that democracy and communism are irreconcilable."

But that was a long time ago. Since then Viktor Orbán changed his mind about many things including the role of Imre Nagy. By the time he first became prime minister he quite openly admitted that "Imre Nagy is not our hero," and soon enough he tried his best to rewrite history by calling the October days "a bourgeois democratic revolution."

Nagy Imre

The rewriting of history is a favorite pastime of Fidesz politicians. They have been working furiously to rehabilitate one of the most undemocratic governments of Europe, Miklós Horthy's regime as it existed between 1920 and 1944. While Admiral Horthy's Corvin-Chain was revived during Orbán's first tenure as prime minister only to be discarded by the socialist-liberal governments that followed, Orbán didn't give up. The Chain returned: fifteen such decorations will be distributed yearly by the government. At the same time, the current Hungarian government is planning to drop several decorations that have something to do with 1956. There was the Nagy Imre Érdemrend (Imre Nagy Decoration) and the 1956 Emlékérem (1956 Memorial Medal). In far-right circles Imre Nagy's name is mud. One commenter in Magyar Hírlap wrote in connection with the Imre Nagy Decoration: "nagy imre egy budos kommunista volt, azok kozul is egyike a legmegvetni valobb [sic], gyava aruloknak!" (Imre Nagy was a stinking communist, among them is one of the most despicable and cowardly traitors.) Obviously, the Orbán government wants to please these people by getting rid of the decoration named after Imre Nagy.

The socialist members of the parliamentary committee on cultural matters naturally inquired what the problem is with Imre Nagy. They received answers that demonstrated the confusion of even those people who submitted the proposal for a new law governing state decorations. One of the MPs, the Christian Democratic István Pálffy, explained that all decorations must somehow be connected to St. Stephen! But then what is the situation with the Corvinus Chain? After all, King Mathias wasn't exactly a descendant of St. Stephen. Or why didn't they abolish the Kossuth and the Széchenyi Prizes? Surely, Pálffy didn't quite dare to tell the real reason. The truth came from Mária Wittner. She explained that Imre Nagy was a communist and as such is not worthy of a commemorative decoration.

The Christian Democratic chairman of the committee added that one cannot single out Imre Nagy, who is after all a controversial figure. In his opinion Cardinal József Mindszenty or even István Bibó were more important in 1956 than Nagy. Another member opined that everybody who deserved it already received the Imre Nagy Decoration and there is no need for more.

As Ildikó Lendvai, MSZP member of the committee, noted, this last explanation is especially curious because the document establishing the Imre Nagy Decoration states that the recipients "must show patriotic courage, serve Hungarian independence, work for societal dialogue, societal peace and unity of the nation." She added that it seems that the Orbán government not only doesn't want to have anything to do with Imre Nagy but it also has problems with dialogue, national unity, and peaceful change.

Meanwhile, those of us for whom Imre Nagy was a hero, the brave prime minister who was ready to sacrifice his life and unlike others never asked for mercy, are shuddering at the direction Viktor Orbán is taking Hungary. A few days ago a French television station called Fidesz a far-right party and mentioned it next to the party of Jean-Marie Le Pen. By now I truly think that the distinction between Jobbik and Fidesz is minimal. Viktor Orbán is just not as honest as Gábor Vona about his beliefs and plans. That's all.

Viktor Orbán and the eleven government-friendly economists: Someone is not telling the truth

In case anyone thought that Viktor Orbán and his right hand, György Matolcsy, minister of economy, consulted with eleven government-friendly economists because of the country’s dire financial situation he would be wrong. The time of the meeting was fixed weeks earlier and it was to be a routine affair.

At the beginning of September the same eleven trusted economists and financial experts met with the prime minister flanked by Matolcsy and the ever-present Péter Szijjártó. At that time Orbán took a lot of notes while the eleven said whatever they felt was important to share with the prime minister. Details are not known. If any of them told Orbán and Matolcsy that the government’s economic policy was untenable and that it would most likely end in failure, they certainly didn’t listen. How forthright these people were is hard to say.

One can question the use of a meeting where only those people are invited whose criticism, if they had any, is gift wrapped. After all, most of these people are either Orbán appointees in the current administration or served in the first Orbán government.

Mihály Arnold is the vice-chairman of the Office of National Taxation and Customs (Nemzeti Adó- és Vámhivatal); Károly Szász, chairman of the Capital Market Authority (Pénzügyi Szervezetek Állami Felügyelete, PSZÁF); István Töröcskei, undersecretary in charge of the office responsible for issuing government bonds; György Szapáry, Hungarian ambassador to Washington; Lőrinc Soós, vice-chairman of the Hungarian Statistical Office; Zsigmond Járai, minister of finance between 1998 and 2000 when he was named by Viktor Orbán to head the Hungarian National Bank; and Henrik Auth, who was vice-chairman of the National Bank during Járai’s tenure.

In addition there were four economists who did not serve in either of Viktor Orbán’s two administrations: György Barcza, the leading analyst of the K&H Bank; Péter Ákos Bod, professor at Corvinus University; István Hamecz, chief economist of the National Bank; and László Csaba, professor at the Central European University. I guess I don’t have to emphasize that these four economists are all close to the present government. There are a couple of economists who should have been invited, but lately they have been critical of the Orbán-Matolcsy economic policy. One of them, Tamás Mellár, was head of the Statistical Office between 1998 and 2000; the other, Attila Chikán, was economic minister between 1998 and 1999. Both men in writing and in interviews are about as critical of the government’s policies as are the so-called liberal economists. And certainly no one was invited from the “liberal camp.” Thus, it is clear that Orbán doesn’t really want to hear anything that is not exactly music to his ears.

Orbán leaving the meeting with László Csaba

Now, the question is what Orbán actually heard at the meeting that took place on November 25. Well, that’s hard to say. If you believe György Matolcsy, the invited economists said exactly what he and all the spokesmen of the government have been saying for days: “Military operations have been launched against Hungary.” Specifically against government bonds and the forint. The fundamentals of the Hungarian economy are strong. As far as the advice the eleven economists gave, Matolcsy claimed that it was useful. One piece of advice was “to prepare a new plan for economic growth”; another, that “Hungary needs a financial safety net that can be provided only by the IMF and the European Union.” It seems that the eleven managed to make him understand that Hungary will not be able to get the Flexible Credit Line he was hoping for.

So, that was what Matolcsy revealed about the discussions that lasted over three hours. Two of the participants remembered differently. According to them, Matolcsy outlined his own understanding of the situation at the very beginning but was then quiet throughout. Except that sometimes he made faces when he didn’t agree with something he just heard. It seems that he repeated his own explanation that included the “speculative attack” story but apparently the economists present “explained to him that this viewpoint is entirely wrong. The financial world doesn’t work that way.” It’s a pretty sad situation when someone must explain to the economic minister how the financial world actually works. If he didn’t know it before, it is not at all surprising that Hungary ended up in this mess.

As for the prime minister, from the information received from some of the participants, he also seems to be totally ignorant of the workings of the financial institutions. Apparently “the prime minister asked for assistance on the most basic economic questions.” He showed great interest in the subject, “he wanted to understand various details, for example, he wanted to find out about credit ratings, interest rates as set by the central banks, about speculation and about how banks work.” Again, total ignorance of finance and banking.

The participants got the impression that Matolcsy and Orbán really believe in the existence of malicious financial circles and hidden speculators who attacked Hungary. Whether the economists present managed to convince them otherwise, I have no idea. One has the distinct feeling that Orbán in person can exert a magical influence on the people in his presence. He manages to change people’s minds within a relatively short time. For example, the student leaders were seething about Rózsa Hoffmann’s new law and were showing the bravery of lions until they got in front of the great man. After an hour they came out of his office like little lambs who now perfectly understood that the law wasn’t that bad, after all.

It is very possible that Orbán showed great interest in the knowledge of these financial men and economists but deep down he wasn’t convinced at all. One thing is sure. According to one of the informants: “They [Orbán and Matolcsy] are not in panic, although one got the impression that they are just a bit scared.” According to a second informant the economists pointed out “some of the more unfortunate steps taken by the government, for example, the extra levies and paying off forex mortgages way under current rates.” Some of them even brought up the possibility of Matolcsy’s retiring from his post. There was no reaction to that audacious suggestion. The next few days may reveal how much the economists said to Orbán and Matolcsy and how much the two absorbed.

The verdict: The new Hungarian electoral law is not democratic

I assume that most of you have heard of gerrymandering, which is a process of defining electoral districts to establish a political advantage for a particular party by manipulating geographic boundaries. The word goes back to the early nineteenth century when Elbridge Gerry, governor of Massachusetts, signed a bill that changed the Commonwealth’s electoral districts to benefit his Democratic-Republican Party. When mapped, one of the contorted districts in the Boston area was said to resemble the shape of a salamander.



If you want to do a little gerrymandering yourself, visit this site. You will be surprised to see what you can do with only a few clicks.

The new electoral law as envisaged by Fidesz was long in the making. Very thorough and careful research of prior results was undoubtedly necessary to come up with a sure-fire plan that would favor the incumbent. The task was complicated by the reduced size of the parliament from 386 members to 199. A further complication that had to be taken into consideration is that instead of a two-step system with the requirement that at least 50% +1 of the voting age population cast votes, the new system is a simple one-step affair with no minimum requirement. Both in the old and in the new system there is an element of compensation, but in the past only the votes of the losers were compensated. Now by some strange logic the winner will also receive extra votes. So, it will be not enough that he/she wins the elections; the winner will win very big.

Theoretically this new system on the face of it cannot be called undemocratic. However, a closer look at the details reveals that the new electoral system will reflect even less the popular will than the one currrently in use. It would also make the participation of smaller parties in the elections close to impossible.

Gordon Bajnai’s foundation, Haza és Haladás (Homeland and Progress), spent months studying the question of a new electoral system. Since last July Viktor Szigetvári, Csaba Tordai, and Balázs Vető have written several articles studying election systems in general and creating models that would give a variety of results. I read most of their articles and found them even-handed and open-minded. Yesterday they came out with their verdict. They decided that Fidesz’s proposal, if it is voted into law without any change, is “not a democratic electoral system.”

It is worth recalling the details of what Hillary Clinton told the leaders of the opposition when she was in Budapest. She “expressed concern … that with the many changes that the government is making with its historic two-thirds majority, Hungary will stay true to its own democratic traditions.” She called for a “real commitment to the independence of the judiciary, a free press and government transparency.” The two-thirds majority “offers the temptation to overreach. It can … allow for important checks and balances to be swept aside, and valid objections from citizens to be ignored.” This is why “the United States and other friends” are urging Hungary to pay special attention to the drafting of the cardinal laws. “The most important of these will pertain to an independent media and judiciary, and free and fair elections. The system cannot be permanently tilted to favor one party or another.”

Well, it seems that this new electoral law proposed by Fidesz is “permanently tilted to favor one party.” According to Szigetvári-Tordai-Vető the electoral districts are manipulated and the totality of the newly introduced features of the law “substantially constrains the replacement of the present government.” According to the authors’ calculations if the same electoral law had been in force in 2002 and 2006 Fidesz would have won both national elections.

Here is what the electoral map of 2002 would have looked like if elections had been held under the proposed electoral law:


The actual results were 48.7% for Fidesz and MSZP-SZDSZ 51.03%.

The situation would have been similar in 2006 when the MSZP-SZDSZ win was greater than in 2002.

The actual results were Fidesz 42.49 and MSZP+SZDSZ 52.85%. Here are the actual results in map form:


Given the composition of parliament today it is unlikely that the final bill will be very different from the proposed one. Therefore, says Ferenc Gyurcsány, the opposition mustn’t participate in the parliamentary discussion of the bill because that way the government party can always claim that the opposition had an opportunity to participate and therefore the process was democratic. Gyurcsány goes even further, which is a much more controversial proposal. The next elections should be boycotted altogether. I’m not sure whether this would be a good idea.

Finally, there is more and more talk about Fidesz plans for early elections. Gyurcsány even heard the proposed date from Fidesz sources: March 18, 2012. He admits that this might be disinformation, but it would make sense from Fidesz’s point of view. The number of the party’s supporters may have shrunk, but they still have a hefty majority while the opposition is weak and fragmented. The results of an early election would most likely be a great deal more favorable to Fidesz than one held in 2014.

On the other hand, there are more and more commentators whose opinion I trust who think that Viktor Orbán’s and the country’s agony will not last much longer. The financial markets and the IMF will take care of him and his regime of national cooperation.

Adventures in alternative reality: the Hungarian government’s reaction to Moody’s downgrade

The title is unfortunately not original. One of Hírszerző’s regular contributors who writes under the pseudonym “Nyüzsi” (an abbreviated form of nyüzsgő = swarmer) came up with it today. The Hungarian government tries to act as if nothing happened. And “Nyüzsi” gives examples. On the homepage of the Hungarian government there is a picture of politicians inside and outside of Hungary at a conference of representatives of Hungarians living in the neighboring countries. The headline reads “Above all the national interest.” When one visits the Ministry of National Economy one can read “In September retail sales again in positive territory.” The first thing one can see on the website of the prime minister is Orbán giving a speech at the conference cited above with the headline: “Dual citizenship is a historical success.” On the same page: “The government guarantees the value of the pensions” and “We must close the era of post-communism.” Fidesz’s website got stuck on the possible negotiations with the IMF and optimistically announces that “The Hungarian government moved in time and gave the correct answer.” If one is interested in other news on the subject, one can click on an article about Antal Rogán’s prediction that “2012 will be the year of careful planning” and that “our emotional relationship with the IMF hasn’t changed,” whatever that means.

I guess one can handle a huge crisis that way but I wouldn’t recommend it. If I were György Matolcsy, I wouldn’t stand there telling the people that I’m baffled because the Hungarian economy is robust and there was no reason to downgrade Hungary. The problem is that there is an attack by speculators against Hungary and this attack is under investigation by the national security forces. Good luck to them! I wouldn’t say such nonsense even if half of the population seems to believe it. You tell a Hungarian that some dark foreign circles are out to get them and they will lap it up. I saw a video today of pedestrians on Budapest streets as a reporter is asking their opinion about the Moody’s downgrade. At least half of them agree that this is a concerted effort on the part of either speculators or simply enemies of the country to ruin Hungary. Since these people don’t have the slightest idea how money markets work, I’m not surprised, but it would be a capital idea if the Hungarian government, instead of resorting to lies, would tell them the truth. One, the country is in trouble because of the high sovereign debt that by itself wouldn’t be so serious if the economy were roaring and not limping along. Two, even more important, if the country didn’t have such an incompetent government and such an aggressive prime minister Hungary would fare better. Viktor Orbán, György Matolcsy, and the whole crew are utterly discredited. And not only when it comes to finance. It is also becoming clear to more and more people that in Hungary the democracy so many people dreamed of for so long is in danger.

I know that Árpád W. Tóta is a favorite of many readers of this blog. Tóta occasionally uses pretty strong language but he is always on target. To give you a taste of Tóta’s style. His blog’s title is “This is Sparta!” and it begins like this: “It must be bad to be György Matolcsy. I am beginning to feel sorry for the poor man. Dreamless nights, anxiety, wetting the bed. And he is surely preparing himself for further adversities. For example, that in the end they will dump the whole thing on him. But this fuck-up is not only his doing. He wasn’t the only one who managed to achieve this junk bond status.”

After that Tóta reminds his readers that the famous Hungarian equivalent of the “f”-word “elkurás/elkurtuk” until now was reserved for Ferenc Gyurcsány’s political moves. This was the word the pro-Fidesz rabble kept repeating joyously. But, says Tóta, “at the time of the classic fuck-up by Gyurcsány Hungary wasn’t junk. There was the threat of a downgrade but it didn’t happen.”

And if through Tóta we got to Ferenc Gyurcsány, let’s see what he did in a similar situation as opposed to what Viktor Orbán has been doing in the last two weeks or so. Gyurcsány, who has a wall on Facebook, wrote a short article today entitled “End” (Vége). Orbán, says the former prime minister, doesn’t want to face the fact, but “after a while he will have no choice.”

Gyurcsány relates some details of the road he had to travel from October 2008 to March 2009 when he resigned. In October 2008 the forint was in trouble and OTP’s shares began to fall precipitously. The top brass got together and overnight they decided that they will ask for IMF and EU assistance. By the time the IMF delegation arrived in Budapest the government already had a plan for cutting 600 billion forints from the budget in 2009 and a further 1.8 trillion between 2009 and 2011. It seemed to everybody, including the members of the IMF-EU delegation, that the measures offered by the Hungarian government were sufficient. However, by the beginning of 2009 it became obvious that they weren’t and that further austerity measures would be necessary. In February the Hungarian government made another adjustment of 1.35 trillion for the next three years. But in the end even that wasn’t enough. The government was planning to cut another one trillion, but by that time the MSZP parliamentary delegation was not ready to support Ferenc Gyurcsány. He resigned. It fell to Gordon Bajnai to implement the final austerity measures amounting to 1 trillion forints and thus to solidify Hungary’s finances.

Negotiations with the IMF and EU were relatively easy in 2008 and 2009 because Hungary had a plan that could be presented to the members of the delegation. It seems that it didn’t dawn on Orbán and his team that without a plan there will be no agreement and thus no financial assistance. It would be a good idea if they realized that the game is over, says Gyurcsány.


Well, we will see whether they will or not. Although MSZP and DK are demanding Orbán’s resignation, I very much doubt that he is ready to make that move now. He might throw Matolcsy to the wolves after a few days as some Fidesz politicians apparently demand. However, I don’t think that the Fidesz bigwigs are ready to dump Orbán himself. When Mesterházy told Lázár to make preparations for the removal of Orbán as prime minister, Lázár’s reaction was that Mesterházy should visit a doctor.

However, my feeling is that the markets will not be satisfied with Matolcsy’s departure. Most analysts know that the policies hitherto pursued came straight from the prime minister. Matolcsy was only his right hand! And in this case, he will have no choice but to leave.

New Hungarian regime, new or not so new decorations

Even as Hungary's economy is on the brink, the luminaries of the non-existent Christian Democratic Party spend their time coming up with a list of new decorations to be awarded to important dignitaries at home and abroad. After all, if there was a revolution and a new regime there must be appropriate ornaments attached to it. Yes, if there is a "Planet Orbán" as The Economist called today's Hungary and an "oddball" prime minister, there ought to be new state decorations. The ones that have been given out since 1990 are too closely attached to the Third Republic. Even their names contain the word "köztársaság" (republic) which was barred from the new constitution. Although the Christian Democratic bill submitted by Zsolt Semjén, György Rubovszky, István Pálffy, and János Latorcai doesn't propose that these old decorations be abolished, they are becoming a dime a dozen. For example, some of them can be awarded to as many as 350 people a year!

Not so the new/old decorations. The most important decoration will be the Order of St. Stephen. Who else? This particular decoration was established by Maria Theresa in 1764 and was abolished in 1946 when Hungary was declared to be a republic. There was good reason to abolish the Order as well as the decoration. Apparently Maria Theresa wasn't too keen on establishing a separate Hungarian order but eventually gave in, but only if the Grand Master of the Order would always be the Hungarian king. Thus, once there was no kingdom there could be no Order of St. Stephen.

Szent Istvan Rend

However, such legal niceties don't seem to deter Semjén and his friends. If one looks through the list of recipients of the Order of St. Stephen since 1764 it is clear that most of them were aristocrats and politicians faithful to the Habsburg dynasty. Here and there one can find writers or painters, for example, Kálmán Mikszáth and Pál Szinyei Merse, but there were some names among the recipients the Hungarians couldn't have been too happy with. For example, the Grand Duke Konstantin, one of the commanders of the Russian forces whose help was necessary to defeat the Hungarian war of independence in 1849, or Alfred Windischgratz who had an important role in the military attaks on the Hungarian forces. Between 1918 and 1940 Horthy refrained from awarding the order, but between 1940 and 1944 the Hungarian government made some unfortunate choices. Among the recipients we find Joachim von Ribbentrop, German foreign minister; Gian Galeazzo Ciano, Italian foreign minister and son-in-law of Mussolini; and finally, Hermann Göring, marshall of the German Reich.

The Order of St. Stephen will be the highest Hungarian decoration. Judging from the proposal, it will be awarded for extraordinary service to the country. Moreover, the person will be required to have an international reputation. I might add that the decoration will be called Magyar Szent István Rend.

Corvin-lanc es koszoruThe next most important decoration will be the Magyar Corvin-lánc (Hungarian Corvin-chain). Now, that is truly interesting because this was a decoration Miklós Horthy established in 1930 to recognize outstanding Hungarians in the fields of literature, art, and science. Originally twelve people could receive the honor yearly, but after the Second Vienna Award when northern Transylvania was ceded by the Romania to Hungary their number was raised to fifteen. The Corvin-lánc was revived during the first Orbán government when twelve people received it. Perhaps it is not a coincidence that the current bill proposes fifteen recipients. After all, this government thinks very much in terms of the Carpathian Basin. A whole office attached to the Prime Minister's Office will do nothing else but busy itself with the work attached to the awarding of the Corvin-lánc.

The third decoration will be the Hungarian Legion of Honor (Magyar Becsület Rend). This is a new one. Yearly ten of them could be awarded to people for outstanding service in the interest of the nation or for unusual bravery demonstrated in the line of duty. In case some of you think that this is an ad hoc decision you are wrong. In the proposed bill there is a detailed description of what this new decoration will look like. I'm almost certain that many millions have already been spent on the design and that the prototype is ready.

Until now the president of the republic was ex officio the recipient of the Order of the Hungarian Republic. Now he will also receive the Order of St. Stephen. In addition, he will be able to use a variation of the Hungarian coat-of-arms that is held up by two angels. And if Pál Schmitt is enamored with the two angels alongside the coat-of-arms, Viktor Orbán must also be able to use a coat-of-arms that is different from the ordinary. He will have the use of a coat-of-arms that will be surrounded by ivy.

There is only one startling omission. The Order of Imre Nagy will no longer be awarded. St. Stephen came, Imre Nagy went. More about this disgrace tomorrow.