Every time either a Hungarian government official or a spokesman is asked about the reasons for the government’s sluggishness in fulfilling the requests of the European Commission, the European Central Bank, or the recommendations of the Venice Commission of the Council of Europe the answer goes something like this: “We immediately responded and fulfilled 99% of the requests, but then these organizations came up with a new set of demands. They are the ones who don’t want to settle these issues.”
Of course, the truth is quite different. It is the Hungarian government that answers letters in the very last moment, refuses to address key issues, and occasionally even enacts new laws that have an impact on earlier ones already approved by the Commission and the ECB. This is happening now with the extension of the transaction taxes.
It was last November that Hungary was forced to turn to the IMF for a loan. If all goes well, perhaps an agreement will be signed in October. That is, if the ever optimistic Mihály Varga, the new minister without portfolio in charge of the negotiations, is correct in his latest prediction. But we should keep in mind that Varga mentioned many dates before: June, August, September. So why not October?
There are many economists and political commentators in Hungary who are still convinced that the Orbán government doesn’t really want to have an agreement and that what’s going on with the central bank law is only part of what Viktor Orbán himself described as a “peacock dance.” It is, as he explained, a choreographed dance carefully executed which is intended to fool his negotiating partners. In the opinion of these commentators Orbán wants to avoid any kind of outside interference with his economic policies and therefore he feigns an eagerness to negotiate and thus hopes to keep the markets happy. As Kester Eddy said in the Financial Times, “if the current Hungarian government of Viktor Orbán ever entered an international strudel-making competition, it would surely win gold, judging by the time it is taking to meet the conditions set by the EU and the International Monetary Fund for a new line of credit.” One must know that in Hungarian to “drag one’s feet” is “nyújtja mint a rétestésztát,” meaning to roll out the dough for strudel, making it very thin.
In any case, today the word came. The European Central Bank gave the nod to the latest changes in the bill on the Hungarian National Bank. Admittedly not all demands were met, but it looks as if the European Commission and the European Central Bank are sick and tired of dealing with Viktor Orbán. According to the statement of the European Central Bank,”the draft amendments, alongside a commitment not to increase the size of the Monetary Council during the term of the current MNB Governor, are an indication that the Hungarian Government is now ready to respect the MNB’s institutional independence.” Why anyone would believe Viktor Orbán’s promises is beyond me. After all, he himself confessed quite openly how he was planning to fool the bureaucrats of the European Union.
But whatever the reason, the EU officials threw in the towel and yesterday, when the word was already out that negotiations can begin, it looked as if all were in order. But the Hungarian government is still rolling out the dough, it seems.
The new leader of the Fidesz parliamentary caucus, Antal Rogán, announced a few days ago that the “members of the caucus are requesting that the government pay attention to job creation and make money available for that purpose.” I have my doubts that the members of the caucus had anything to do with this “request.” Fidesz doesn’t work that way. More likely the top brass looked at the opinion polls and decided that something must be done.
The request is all well and good, but one must keep in mind that in order to impress the European Commission with the excellent work they are doing at reducing the deficit Matolcsy and Orbán decided to submit the 2013 budget very early. The jobs bill is under discussion at the moment and it will be voted on in the next few days, before the summer recess. The budget prepared in the last couple of months naturally doesn’t not contain the stimulus package of 300 billion forints that Matolcsy announced yesterday. A bit of a problem, th0ugh not for a man like György Matolcsy, the author of “fairy tales.” Mind you, this latest brainchild of how to gather 300 billion forints from nowhere has been described by an LMP member of parliament as “shamanism.”
What did Matolcsy come up with? Naturally, new taxes but these taxes are truly unique. The economic minister plans to extend the financial transaction tax to the central bank and the treasury, with revenue from the levy expected at 380 billion forints ($1.66 billion). Absolutely brilliant, don’t you think? The government taxes itself. Money is being transferred from one pocket to another.
András Simor, chairman of the Hungarian National Bank, immediately fired off a letter to László Kövér, speaker of the Hungarian parliament, and to the chairman of the parliament’s audit and budget committee. Simor didn’t consider the content of the proposal a breach of the pertinent laws. He only reminded parliament that “bills pertaining to the role of the National Bank of Hungary require prior consultation with the NBH and the European Central Bank, respectively.” And such mandatory consultation did not take place.
Although Simor complained only about the lack of consultation with the Hungarian National Bank and the European Central Bank, I suspect that this latest move of the Orbán government will again slow down the already snail-pace preparations for the negotiations for the 15 billion euros Hungary allegedly needs so badly. Or doesn’t need at all, depending on whom one is listening to.
I truly feel sorry for the “bureaucrats” of the European Central Bank. They thought that at last they got rid of this pesky little fellow and now he is back. And what if the bureaucrats in Frankfurt find that a government taxing its own national bank’s financial transactions is illegal? I have the sneaking suspicion that this is a first in the world of finance and therefore might be problematic. Of course, it is possible that the bureaucrats will just shake their heads and let Orbán and Matolcsy run with it.