Hungary and the IMF negotiations: An impasse?

Today ATV, the television station that is no friend of the current Hungarian government, dropped a bombshell: there are some non-negotiable items among the many demands the European Commission presented to Hungary many months ago.

A list of Hungarian counter-proposals was rejected already at the end of February by Brussels. So, the Hungarian government took another stab at satisfying the European Commission by making minor changes in the laws Brussels objected to concerning the independence of the Hungarian National Bank, the so-called reforms of the judiciary, and the position of the ombudsman in charge of data protection. Tibor Navracsics announced on March 22 that he was “cautiously optimistic.” In his opinion the Hungarian government gave “good answers to the objections of the European Commission.” However, he added, Hungary refuses to make any changes in the forced retirement of about 300 judges who either reached or soon will reach their sixty-second birthdays. As far as the Hungarian government is concerned, the question of retirement is not an issue connected to the judiciary.

Two weeks after Navracsics’s expression of “cautious optimism” Népszava reported that the Hungarian answers might not satisfy the commissioners in Brussels. A few days later Bloomberg reported that “Hungary probably failed to meet bailout-talks terms.” The news to that effect came from the Eurasia Group. One of the Group’s New York-based analysts claimed that the EU “continues to hold the bar high, suggesting agreement on preconditions still have some way to run.” Yet, Hungarian government officials made optimistic statements about the imminent start to the negotiations. Or, occasionally, for home consumption, members of the government told outright lies. In January András Giró-Szász, the government spokesman, flatly denied that the European Union laid down any preconditions to initiating official negotiations. At the end of February Zoltán Cséfalvay, undersecretary in the Ministry of National Economy, announced that negotiations could begin at the end of March or early April.

The latest and most flagrant lie came two days ago from Foreign Minster János Martonyi who claimed that Hungary is totally ignorant of any preconditions to negotiations for a loan. As if he never heard of the infringement proceedings levelled against Hungary that have been dragging on for months because of Viktor Orbán’s reluctance to give up his dictatorial plans for the “renewal of Hungary.” Moreover, suddenly Martonyi discovered that “political preconditions are unacceptable” altogether. So, if we take Martonyi’s words as the manifestation of the official Hungarian position, Hungary can forget about the line of credit it is hoping to get from the IMF. Clearly, Orbán wants the money but with no strings attached. Or, more crudely put, he wants the International Monetary Fund and the European Union to finance his “war of independence” against the Union and the building of a Hungary that refuses to share the values the European Union holds dear.

This latest argument that the infringement proceedings and Hungary’s inadequate answers to them is a separate issue from the loan negotiations was further emphasized today by Enikő Győri, Martonyi’s undersecretary in charge of European affairs. She acted as if she had just discovered an unfair connection between the political demands and the IMF negotiations. She expressed her hope that “no one wants to mix up things that are not necesarily linked to starting the credit talks.” If I understand her correctly, the latest Hungarian position is that out of the three infringement proceedings against Hungary only the one that concerns the Hungarian National Bank has anything to do with the loan negotiations. The other two, the independece of the judiciary and the position of the ombudsman in charge of data protection, are political issues that are utterly unrelated to matters of finance.

This is where we stood early this morning. But around noon ATV published an article that reported on a document that originated in Brussels and was sent to the Hungarian government in late March. It was a non-paper or, as it is better known, an aide-mémoire. This document catalogued five points that are non-negotiable as far as the European Commission is concerned. In the case of the first three points Hungary has no elbow room at all. The Hungarian government either accepts the dictate from Brussels or “the “European Commission will use other means at its disposal” to solve the problem.



Here are the five points: (1) The president of the National Judicial Office must justify its decisions and must provide legal remedy following a decision. (2) The president of the National Judicial Office, after her nine-year term, cannot be reelected. She cannot serve even in an interim capacity after the conclusion of her term. A vice-president must be nominated who can run the office while waiting for a new president to be nominated and elected. (3) Neither the president of the National Judicial Office nor any other judicial leader can have the right to move cases to other courts because this provision of the new Hungarian law violates the basic law of fair judicial treatment. (4) The current system of the president of the republic appointing judges for brief durations and many times for “trial periods”  must be stopped. (5) Transfer of judges against their will must cease and the automatic termination of their services be forbidden.

These are only five points but we know from Olivier Bailly, the spokesman of the European Union, that there are some thirty odd items that Brussels finds objectionable. Bailly also added at yesterday’s press conference that to start negotiations there must exist trust, and in their “opinion that trust is still lacking” in Brussels and in the financial world toward Hungary. The problem according to the European Commission is not just the specific infringement proceedings against Hungary but that Viktor Orbán’s government policies frightened off foreign investors. According to Bailly the Hungarian government should take steps that “would make the return of the investors to Hungary possible.”

When will the European Commission give an official answer to the latest Hungarian counterproposals? They are not in any hurry. This week they don’t meet, next week they will be Strasbourg, but perhaps in May there will be some word. However, we just learned that on April 23 Viktor Orbán will be able to meet with José Manuel Barroso, the head of the European Commission, in Brussels. Will he be able to charm Barroso? I somehow doubt it.


  1. LwiiH: “so one has to question the real desire of the government to do the deal now.”
    Or at any time. Suspicion grows that Orbán gambles on fooling the markets with the prospects of an IMF loan.

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