Month: December 2011

It will be a happy new year

My optimism is legendary, and when I read this afternoon that Viktor Orbán and his friends are building a barricade around the parliament building I felt certain that Viktor Orbán will not be the prime minister of Hungary for long.

Sometimes they destroy barricades, sometimes they build them. Now they are in the building phase. Because they are afraid. Afraid even of those peaceful demonstrators who have been out on the streets with growing frequency.

But barricades don’t help if the trust of the population and the world has been lost. Therefore the coming year will be an important one for the future of Hungary and the Hungarians.

Happy New Year to All of You

Demonstration on Kossuth Square, December 31, 2011

A new beginning

It will be an eventful year, I’m sure, and an exciting one. So, cheer up everybody!


The approaching crisis: Viktor Orbán on a collision course

Below you will find a facsimile of U.S. Secretary of State Hillary Clinton’s letter to Hungarian Prime Minister Viktor Orbán. I might add that the letter, along with all the others he received, didn’t make the slightest impression on him. This morning in an interview on Magyar Rádió he emphasized that no one can tell legislators elected by the Hungarian people what kinds of laws to enact. Once the laws are passed, the European Commission may object to some of the laws’ provisions. In such cases the Hungarian government will decide whether the objections are warranted or not.

As far as the negotiations with the IMF-EU delegation are concerned, according to Orbán, they will resume in early January. These negotiations are “important but not indispensable.”

I highly recommend taking a look at a fairly lengthy discussion on the Hungarian situation vis-à-vis the European Union and the IMF-EU negotiations on CNBC. In addition there is an article in Bloomberg and another on the CNBC site.

* * *


Neither the markets nor western politicians like Viktor Orbán’s Hungary

Ever since the Hungarian government was forced on November 17 to turn to the IMF for a “safety net,” as Viktor Orbán prefers to call a desperately needed loan, we hear nothing else but that Hungary actually doesn’t need cash because the country is able to finance itself from the market.

More and more analysts in Budapest and elsewhere have the distinct feeling that IMF-EU negotiations might be postponed indefinitely. If the politicians in Brussels come to the conclusion that one cannot deal with Viktor Orbán, they can simply refuse to negotiate with him. At the same time it is becoming increasingly clear that Hungary cannot finance itself from the market.

The IMF is certainly not in any hurry. While Orbán talks about the resumption of the talks in January in definite terms and expresses his firm belief that the negotiations will be successful, Christoph Rosenberg, the chief negotiator, is not at all encouraging or supportive. On the contrary, he told Reuters that no date was fixed and talked about the possible negotiations in the vaguest terms: “if and when negotiations resume the subject will be a stand-by arrangement with quarterly monitoring and agreed conditionality.” And this is what Orbán doesn’t want. He just wants the money without any obligations or oversight.

Early this morning CNBC announced that Hungary’s debt management agency scrapped a three-year bond auction and reduced its original offer of the ten-year bonds, while it sold 10 billion forints worth of five-year bonds as planned. The auction yield jumped to 9.70% on the 10-year paper from 7.78% at the last auction about four weeks ago. The five-year bonds were sold at an average yield of 9.63%, up from 8.72% only two weeks ago. These are horrendous rates that a country is simply unable to bear. BBC also considered the story noteworthy and added that the last time the Hungarian government had to abandon part of a planned bond auction was in 2008 when it was forced to seek IMF help.

But Fidesz politicians are not caving in the face of market pressure. Just today János Lázár, this time as the mayor of Hódmezővásárhely, handed Erste Bank an ultimatum: the bank is supposed to share the cost of loans to the city amounting to 64.9 million Swiss francs. Hódmezővásárhely is the most heavily indebted town in Hungary in relation to its population, and because of the weakening of the forint against the Swiss franc the financial burden is considerably higher today than it was a couple of years ago. Both the IMF and the EU objected to the government’s decision to force banks to accept payments of mortgages and loans in general in one lump sum at lower than the current forex rates. Now, Lázár demands the same treatment for his city. If Erste Bank doesn’t oblige, he is threatening the bank with new legislation that would force banks to extend their agreement to cover municipalities as well as individuals. If other cities demand the same treatment and if the Hungarian government obliges, that would practically wipe out all Hungarian banks.

Despite this Fidesz bravado the fact remains that Viktor Orbán is in trouble. Hungary cannot finance itself from the market and the prime minister has managed to alienate both the European Union and the International Monetary Fund. And we can add the United States, a country that has a large say in the affairs of the IMF.

What if the European Union blocks negotiations as long as Hungary’s prime minister is Viktor Orbán? The IMF-EU delegation already refused to accept György Matolcsy as the head of the Hungarian negotiating team, and when Tamás Fellegi assumed the position of chief negotiator he was sent there by Viktor Orbán with no authority to negotiate on any terms other than the prime minister’s unbending position.

I think the IMF-EU team at the express instruction of the European Commission can stay away indefinitely. Or until the members of the Commission in conjunction with the U.S. State Department are satisfied with the state of affairs in Hungary. And yes, that may mean the removal of Viktor Orbán and his replacement with someone who is more willing to negotiate and who doesn’t threaten the democratic process in a country that belongs to the European Union.

This picture depicts Viktor Orbán’s situation quite accurately at the moment

But will he be ready to retreat? Will the western politicians and the markets trust him? It is worth repeating that it was reported that to a small circle of friends he announced that if the IMF was coming, he was leaving. During his forty-minute-long interview on HírTV the reporter asked him whether this “rumor” was true. His answer was telling: What a question! After all, the IMF has never left! To my mind, that was an admission. But at the same time this exchange indicates to me that he really didn’t mean what he said. When the chips are down he would rather stay. However, by now I have the feeling that it is not his choice.

The question is when the rest of the Fidesz leadership will come to the conclusion that “the beloved leader” must depart. Surely, at the moment the support seems to be strong and united. As Adam LeBor recalls in his latest article in The Economist there is a joke circulating in Budapest:

Q: What is the difference between a flock of sheep and the Fidesz parliamentary fraction?

A: Sheep have a mind of their own.

Mind you, one has the feeling that these “supine MPs” as Adam LeBor calls them don’t even know what they are voting on. Here is a typical late night scene from the Hungarian parliament:

 Some of “the Fidesz flock”

Pressure or no pressure, nothing seems to wake up Viktor Orbán and the men and women who blindly follow him. Thousands are demonstrating against the Fidesz MPs in front of parliament, and the crowd calls the government “bóvli,” the Hungarian word for junk bond. It is not enough for them that two employees of state television have been on a hunger strike for nineteen days; yesterday the CEO of the organization responsible for all the public media stations fired them. And after they blasted “Jingle Bells” day and night to drive the demonstrators half crazy, this morning they decided to put a high fence around them.

Lendvai IldikóIn no time several MSZP and DK politicians with the assistance of some civilians dismantled the fence. The video showing Ildikó Lendvai (age 65) kicking the fence with full force was quite a sight.

And then there are the heroes of the hunger strike, Balázs Nagy-Navarro and Aranka Szávuly, both as of yesterday former employees of MTV. The two have been on a hunger strike for nineteen days. At the beginning they were sitting practically alone at the entrance of the Public Television Bureau along a busy road with lots of cars zooming by but few people around. But lately crowds are gathering there. Hundreds and hundreds of people came to give them blankets and hot drinks. By now five more people joined the two.

Nagy-Navarro was not seeking any kind of political leadership yet he has become an emblematic figure of the protest. Today he announced a huge demonstration in front of the parliament building for December 31. As he said this afternoon, he and Aranka Szávuly began their hunger strike on account of the manipulation of news but by now their protest has been widened. Their aim is the removal of Viktor Orbán’s undemocratic regime. They are ready to unite with all who are ready to fight.

Balázs Nagy-Navarro and Aranka Szávuly a couple of days ago

Orbán Viktor received New Years greetings from the Belgian prime minister and leader of the Liberals in the European Parliament, Guy Verhofstadt. It wasn’t exactly the usual message at this time of the year. Verhofstadt wrote that “cutting back on media freedoms, independence of the Constitutional Court and Central Bank, freedom of religion and sexual orientation drives you closer to the communist past.” I may mention in passing that the newly appointed CEO of the organization that is responsible for all the public media outlets has an informer past. Details can be read even in Heti VálaszOrbán is not finicky when it comes to his followers’ less than immaculate past. At any event, it is this man who is now defending Orbán’s “democracy” against the hunger strikers.

Increasing pressure on the Hungarian government

This morning I was still planning to write about how the state-controlled Hungarian television presents news. Or rather, how the evening news on MTV doesn’t give credible information about the events of the day. I will return to the topic soon because during the holidays I had more time than usual to watch Hungarian television. Unfortunately, I came to the conclusion that most Hungarians, even those who watch MTV’s news or listen to MR’s news programs, are badly underinformed. Or, one can even say, misinformed. On the other hand, some of the right-wing but independent newspapers and TV stations showed surprising boldness, especially in comparison to the state-owned media.

Here, however, I would like to talk about the renewed effort of the United States and the European Union to influence the course of events in Hungary. I think that by now there is no question that if Viktor Orbán isn’t stopped he will soon be in a position to introduce a quasi-dictatorship in Hungary. Today several people, most of them living abroad, phoned in to György Bolgár’s program and complained that the Hungarian people and Hungarian journalists didn’t raise their voices in time against Viktor Orbán’s regime when it was clear from at least the mid-1990s that Fidesz’s aim was to introduce a regime similar to that of Mussolini’s fascism. They are baffled by the relative passivity of the population. Indeed, let’s face it, the opposition under the best of circumstances manages to gather only a few thousand people at their demonstrations.

Yes, I get angry too when I hear from friends who have just returned from a visit to Hungary that “people are not interested in politics.” I angrily answer that “in that case they deserve what they get,” but when I calm down I realize that Hungarian democracy is still in its infancy. Many people don’t even understand how democracy works. Supporters of Orbán justify the policies of the government by pointing out the overwhelming mandate Fidesz received at the polls. They seem quite incapable of understanding that regimes, even if they have the overwhelming support of the population, might be undemocratic and evil. It is enough to think of Hitler’s Third Reich.

By now the initial support of 53% of the voters that brought Fidesz to power has dwindled, but inside of parliament a two-thirds majority in seeming unison votes mindlessly on hundreds of new laws that will not only affect the everyday lives of the people but that are steering the country away from democratic principles upon which Hungary’s Third Republic was built in 1989-1990. Fidesz politicians don’t even make a secret of the fact that “their democracy” is not the same one the democrats at the Round Table had in mind. János Lázár, head of the Fidesz caucus (akin to the majority “whip” in the American Congress), said in an interview that “with lots of American help a consensual democracy was established in Hungary in 1989-1990 but that doesn’t mean that a couple of decades later only that kind of democracy can exist.” Instead, he advocates “a majority democracy” which is more effective. Translated into plain English, it means that “we will run the country and you shut up.”

I’ve written at length about the European Union’s dissatisfaction with the way Hungary is heading. Three letters reached Budapest from Brussels alone. At the same time signs of renewed American efforts were visible. First, U.S. Ambassador Eleni Tsakopoulos Kounalakis’s letter appeared in Heti Válasz, subsequently politely rebuffed by János Martonyi, Hungary’s foreign minister. Then Thomas O. Melia, assistant undersecretary in the State Department, gave a couple of interviews. To crown the American effort on December 23 came a letter from Hillary Clinton herself addressed to Viktor Orbán. According to Charles Gati, a Hungarian-born American political scientist who saw it, Clinton’s letter is “a kind of last warning.” At least this is what became clear from a conversation György Bolgár had with Gati on December 27 on “Let’s Discuss it!”


Viktor Orbán doesn’t look happy listening to Hillary Clinton on June 27, 2011

According to Gati, Clinton’s letter also touched on Klubrádió’s loss of frequency, which indeed is a terrible blow to Hungarian democracy. In fact Gati and Mark Palmer, ambassador to Hungary between 1986 and 1990, suggested that the American Congress consider reinstating the Hungarian-language broadcast of Radio Free Europe.

As we know, none of these letters made a dent in Budapest. The laws the European Union and the United States objected to and asked that they be tabled were passed, although some with minor alterations. The attacks on Klubrádió are continuing, and the two journalists who have been on a hunger strike for almost three weeks were just fired. Demonstrating MPs were carried away by force and detained for hours.

As for Hillary Clinton’s letter, the Christian Democratic László Varga didn’t mince words today in parliament. “And even Mrs. Clinton raises her voice! We would like to create a European law [on the churches and religion], not an American one which allows all the flowers to bloom” referring here to Mao Zedong’s well-known saying. In English this doesn’t sound as bad as in Hungarian where Hillary Clinton was referred to as “Clintonné nagyságos asszony.” Before 1948 there were all sorts of silly titles given to people of rank. The lowest was “nagyságos.” Everybody who had a high school education and a white collar job was “nagyságos úr” and his wife “nagyságos asszony” even if she was just a homemaker. People over a certain rank in the civil service or in the army were called “méltóságos.” So, poor Hillary Clinton didn’t fare too well in the hands of László Varga, the Calvinist minister who likes diversity of opinion so much that he hit his fellow MP Gábor Vágó, lying helpless on the ground after the LMP protest, on the head with his briefcase.

So, it is becoming quite clear that even strongly worded letters don’t make the slightest difference. We will see what will happen if there is a tangible sign of a financial threat. Because today the International Monetary Fund announced that no decision has been made on the resumption of negotiations with Hungary. Whether there will be negotiations at all depends on whether the Hungarian government is willing to discuss some of the “key policy issues.” If not, no negotiations.

Christoph Rosenberg, mission chief on Hungary, specifically mentioned additional concerns that emerged regarding new legislation proposed by the Hungarian government that led to an interruption in the discussions earlier this month. “If the Hungarian government is interested in proceeding on program discussions, it should demonstrate its willingness to engage on policy issues that are relevant to macroeconomic stability. This includes close consultation on the proposed central bank legislation and the financial stability law as part of the negotiations.” This is specific enough. If these laws go forward, as they are doing at the moment, there is no money. Your choice.


Christoph Rosenberg might not be so jolly next time in Budapest

But, of course, these two laws are no more than a small part of the concentrated effort to dismantle Hungarian democracy. And to tackle those problems the IMF-EU negotiating team’s threats are not enough. Here is where the Hungarian people must become engaged.

Success on top of success: How György Matolcsy sees the situation in Hungary

I will not be at all original today. I was so intrigued by a compilation of announcements by the National Economic Ministry (Nemzetgazdasági Minisztérium) from January to December that I thought I would share the list. I really want to be the bearer of good news.big grin

The cartoon below illustrates how at least some Hungarians feel about the government’s communication.

First you have to exercise self-criticism (see 2/4 entry)

They have definite ideas about Viktor Orbán’s truthfulness as well. One ought to read these success stories in that light.

January 14. The New Széchenyi Plan will be the answer to the challenges facing the country and it will ensure sustainable economic growth.

January 24. There will be great opportunities for Hungarian companies in Sri Lanka.

February 4. We expect self-criticism from the IMF. Its economists were completely wrong about the numbers in the 2010 budget. In addition, they called the liquidation of private pension funds “nationalization” when 97% of investors in these funds decided to switch to the state pension fund on their own volition.

February 9. More people want to work in Hungary.

March 4. Close to 700,000 families enjoy the advantages of the new system of taxation.

March 11. A new era for greater economic growth began in Hungary.

April 6. 17,500 new jobs in the auto industry thanks to the decisions of the government.

April 8. Hungary is on the road to success. The Hungarian reforms are in accord with the recommendations of the OECD.

April 18. The Germans appreciate the Hungarian government’s efforts at reform.

April 28. 250 new jobs in Ózd.

May 4. Stronger ties with South America.

May 13. Here is the turning point. Hungarian economic growth at a four-year high.

May 18. The number of jobs in the private sector has been growing rapidly.

May 31. Increase in the manufacturing industry. Economic growth accelerates.

June 2. Record trade surplus. Rapidly growing exports.

June 3. New jobs will be created as a result of negotiations between the government and Jabil Circuit Kft. in Tiaszaújváros.

June 8. Widening economic relations with Indonesia.

June 15. Hungarian industry performed best in the region.

June 17. The number of employed grew again.

June 27. Strategic opening toward Saudi Arabia.

June 30. Record trade surplus. Change in foreign trade relations.

July 7. We managed to avoid bankruptcy thanks to our successful policies. It took only a year to bring the country back from the edge of bankruptcy.

July 14. It will be easier from September on. The administrative burdens of companies will decrease. The changes will result in a 400 billion forints savings.

July 26. Highest monthly growth recorded since January in the retail trade.

July 28. More and more people are working. The rate of employment is 55.8%.

August 3. Dynamically growing trade surplus.

August 19. The number of workers in the private sector has grown. Salaries are also growing.

August 24. In the region the Hungarian retail trade has slowed the least.

August 24. Hungary’s falling behind the European Union average has stopped.

August 29. The number of employed people in Hungary is steadily growing.

August 31. In one year the investment in the manufacturing industry has grown by 20%.

September 2. Record surplus in foreign trade transactions in the first six months.

September 15. Growth in industrial production in every region of the country.

September 28. Employment has been dynamically growing all through the year.

October 3. Again a record surplus in foreign trade.

October 18. The government significantly lowered the country’s sovereign debt.

October 21. Next year’s deficit projections are well established and can be achieved.

October 28. The tendency is unbroken: in the last year employment has been growing.

November 3. A significant positive change in foreign trade.

November 10. Hungary won the first battle. A prognosis by the European Council that Hungary’s deficit will be less than 3%.

November 11. The government disagrees with the opinions of Fitch. The 2012 budget figures will be held and sovereign debt will be lowered.

November 17. Hungary at the turning point. In the last year and a half we put the Hungarian economy on new foundations. To this end we had to sever all the old types of cooperation that restricted our economic independence. Now we have achieved this goal. The age of renewal is closed and the era of growth has arrived.

On the same day the government announced that it is turning to the IMF to negotiate a “safety net.” 

November 18. Wages have increased again.

November 25. Moody’s evaluation of the Hungarian economy lacks any basis. Hungary considers Moody’s move part of a concerted financial attack on the country.

November 28. The employment rate is the highest in three years.

November 30. The performance of the manufacturing industry is still outstanding.

December 8. The financial burden of entrepreneurs is lighter by 400 billion forints.

December 9. The Hungarian GDP in the third quarter is higher than the European Union average.

December 19. Hungary’s sovereign debt is decreasing.

December 22. S&P’s decision on Hungary’s credit rating is not about Hungary but about the euro crisis.

The Ministry of National Development and the building of a “national bourgeoisie”

As we know, the Orbán government doesn’t hide its intention to assist the development of a very rich Hungarian upper crust. Although Viktor Orbán prefers to talk about a “national middle class,” Orbán’s middle class is not exactly the kind of middle class we normally envisage. We are talking here about the super rich. Orbán and Fidesz are using the whole state apparatus to enrich those few very rich men who in turn are beholden to the party and the government and who therefore are supposed to fill the coffers of Fidesz and most likely even the pockets of its leading politicians.

One common tactic is to award government contracts at inflated prices, often without competitive bids, from which the recipient is supposed to kick back a certain percentage to Fidesz and/or leading Fidesz politicians. The fattening of these big cats has cost Hungary a lot and not just in money. According to József Papp, a professor of economics at Corvinus University, the last year and a half was spent building up a strong Hungarian capitalist class and assisting them through more and more government orders and subsidies. This artificial and unnatural way of creating a domestic capitalist class is not good even for the Hungarian businesses involved because their growth is tied to government orders and they are at a loss in the competitive marketplace.

It is hard to ascertain how much is true about the alleged incredible graft that is going on, especially in the Ministry of National Development which just got a new head–a no-name minister without a university degree. It is widely believed that Mrs. László Németh (until recently we didn’t even know her first name) is a front behind whom important businessmen with close Fidesz connections stand.

József Debreczeni in his latest book on political corruption (Slough of Politics) spends several chapters on party finances. According to Hungarian law parties can spend very little money on election campaigns. One million forints per candidate. This is naturally not enough, and the money that is actually spent–about ten times more than the official figure–is ill gotten. No one knows exactly the source of this money but I suspect that most of the under-the-table money comes from Hungarian businessmen who win government contracts only if they hand over part of the money to the party “comptrollers,” a position that came into being in 1989-1990 when some of MSZMP’s incredible wealth that had accrued during the Rákosi and Kádár regimes had to be converted into invisible business ventures. It was MSZP that had the first comptroller, but Lajos Simicska, the man who handled Fidesz’s affairs, turned out to be much better at illegal wheeling and dealing. While the socialists and the liberals were caught at least once, Simicska’s “financial empire” was never seriously threatened. There was talk but that was all.


Lajos Simicska

Simicska is a very good friend of Viktor Orbán from his high school and college days. According to some, he is one of the most influential people in the Orbán circle because the prime minister considers him to be a financial genius. Perhaps he is, but most people also describe him as an unscrupulous and ruthless fellow without any moral compunctions.

Simicska is surrounded by other influential businessmen who are now occupying important positions either in government or as business leaders ready to reap the benefits of Fidesz’s new position. One such man is a lawyer from Szolnok, the birthplace of Anikó Lévai, wife of Viktor Orbán. His name is Zsolt Nyerges, and he recently ventured into the business world. The Hungarian media know little about Nyerges because he is very good at staying out of the limelight.

Zsolt Nyerges

Another businessman is Csaba Baji who lately became the CEO of Magyar Villamos Művek (Hungarian Electric Works). Interestingly, he is also from Szolnok. Several other people close to Simicska and Nyerges ended up in the Ministry of National Development. For example, Zoltán Schváb, assistant undersecretary in the ministry, or Ágnes Molnár, undersecretary responsible for the coordination of economic development. Another undersecretary, Sára Nemes, is also from Szolnok. Thus the whole top echelon of Tamás Fellegi’s ministry, including the former minister himself, is in one way or another connected to Lajos Simicska and his close friend Zsolt Nyerges.

Mrs. Németh’s performance before the parliamentary committee was miserable. She read whatever little she knew about the workings of the ministry and when it came to questions, she couldn’t answer most of them even with the help of the undersecretary sitting next to her. Apparently even the Fidesz members of the committee were taken aback, but being good partisan politicians they voted for her. According to Magyar Narancs, her appointment doesn’t come as a surprise to people in the know because Mrs. Németh belongs to the circle of Nyerges, Simicska, and Baji. After the elections Mrs. Németh, in spite of her lack of a university degree, was put into a very high position in the Magyar Fejlesztési Bank, a state-owned investment bank which seems to be the private wealth fund of the Fidesz government. (It just spent 4 billion forints buying the Ferencváros (Fradi) soccer team and the club’s real estate holdings. A poor team and a losing business venture.) She was made a member of the board of MVM (Magyar Villamos Művek) where the CEO is Csaba Baji, as I said a close associate of Nyerges and Simicska.

The general impression has been for some time now that Fellegi’s ministry is under the influence of the Simicska-Nyerges group. It is the Ministry of National Development that receives all the EU subsidies, some 1,200 billion forints. Already one of Nyerges’s companies, Közgép Zrt., received at least 200 billion forints in government contracts in the last year and a half.

And here is the new minister. The only female minister in the second Orbán government.

Mrs. László Németh

Mrs. László Németh seems, outwardly at least, formidable. However, she behaved very timidly before the committee which was chalked up to nervousness. Most people, including some Fidesz politicians and supporters, think that she is not qualified and will only make sure that government contracts end up with the “right people.”  The national bourgeoisie!

To celebrate the Christmas Tree Revolution in Hungary

I want to thank all of you who have faithfully followed this blog over the years. I’m especially grateful to those who take an active part in making Hungarian Spectrum a highly regarded English-language blog on Hungary.

Yesterday’s events have already been nicknamed the Hungarian “Christmas Tree Revolution.” Hence the card below.

A Happy Holiday Season for All