After the first lie, here is the second: It seems that Viktor Orbán can’t help himself

Hot off the press! According to Viktor Orbán, the list of IMF/EU demands he was talking about in Sárvár yesterday is not the one the IMF/EU delegation left behind for the Hungarian government to ponder. No, this is a brand new one, received only the day before yesterday. This is what the prime minister said this morning in his regular Friday morning interview on MR1, the premier public radio station. In this document, Orbán emphasized, there are specific demands. He counted about thirty of them.

Orbán obviously thought that with this announcement he could resolve the contradiction between his two statements regarding the Hungarian attitude toward the IMF negotiations. Because on Wednesday he was all optimism concerning an early conclusion of the negotiations while on  Thursday he announced that the demands of the IMF/EU were unacceptable. So, he emphasized that the news of these tough new demands reached the Hungarian government sometime between Wednesday afternoon and Thursday evening.

What Viktor Orbán couldn’t have known was that by Friday afternoon Index would have this “brand new” document in hand and would summarize in detail the contents of this letter that came from Brussels.

Viktor Orbán, it turns out, lied again. The letter was not dated yesterday as the prime minister claimed but a week ago, August 31. (And I doubt that it was sent by regular post.) Moreover, the document doesn’t contain any specific demands. This fourteen-page economic and financial analysis of the Hungarian situation was written by economic experts attached to the European Commission and it basically reiterates the contents of the letter that the IMF/EU delegation left behind in Budapest at the end of July. There is not a word in the document about lowering pensions, property taxes, and increasing VAT. On the contrary, the experts in Brussels mentioned that the flat tax increased the tax burden on the poorer strata of society and in fact suggested a lower tax rate for those receiving very low pay.

Among the general observations, the authors of the document complained about the overly optimistic GDP growth figures for this year and next. This year’s budget is calculated on the basis of a 0.1% growth in GDP while next year the  ministry of national economy is counting on 1.6% growth. The EU, on the other hand, expects -1.o% this year and next year only 1.0%. Thus the budgets based on these figures are most likely unrealistic.

In order to fulfill the obligations undertaken as part of the convergence program, further steps must be taken. The Kálmán Széll Program 2.0, on the basis of which Brussels decided to resume the issuance of payments under the cohesion program, has since been superseded by new government announcements of additional spending.

As for the deficit, this year it may be only 0.25% higher than the promised 2.8%, but next year it may be as high as 4% instead of the promised 2.2%. The Hungarian government insists that there will be an increase in tax revenue coming from better tax collection, but “that is such an uncertain factor that they cannot take it into consideration.” The experts also think that less money will be coming in from financial transaction taxes than the government expects.

Although the Hungarian government is very proud of its achievement in reducing the  sovereign debt, the European Commission projects that by 2020 the debt may be 100% of the Hungarian GDP instead of the current 80%. Therefore “serious fiscal steps must be taken to keep the Hungarian economy on the path of sustainable growth.”

The cow is Hungary and the buckets the various kinds of taxes.
The caption: “Good morning, Sunshine!” / istenbizony.hu

But let’s return to some of the most interesting points on taxation. While Viktor Orbán tries to make out the IMF and EU economists as heartless number crunchers, according to this document they seem to worry more about the Hungarian poor than the patriotic Orbán government does. The document points out that childless workers earning the minimum wage had a tax burden of 4.8% before the Orbán tax reform. Today their tax burden is 16%. The general tax burden, including payroll taxes, grew from 38.8% to 48.8%, one of the highest rates in the European Union. “This reform increased the budget deficit more than 2% of the GDP without having any kind of beneficial influence on employment.”

There is a special section on the problems of the banking system. The extra levies and the financial transaction taxes reduce the ability of banks to lend. The answer is the creation of a stable and properly functioning market economy. Instead, “the government wants to remedy the situation by the state taking a larger role in financing through the Hungarian Investment Bank, a state institution.” Loans that are supported by the state may have a role to play, but “in the long run they do not help.” The Hungarian banking sector tried to explain that fact of economic life to the members of the government to no avail.

Another section deals with the necessary “comprehensive” reforms that have not been undertaken by the Hungarian government in the last two years. The Commission expects reforms in education, in energy policy, and in mass transport. The experts note that as far as the reorganization of  MÁV, the Hungarian state railway system, is concerned, not much has happened except promises of future reforms. Still only about 10% of passengers pay full fare.

There are a couple of observations that should be of concern to the European Union. One is the unfair treatment of non-Hungarian companies. The Hungarian government doesn’t hide the fact that they give preferential treatment to domestic companies at the expense of the multi-nationals. The document, for example, specifically mentions the piece of legislation that is commonly called “plaza stop.” Foreign companies are prevented from opening new stores because of a size limitation.

These are the most important suggestions coming from the European Commission. They all sound reasonable to me. But if we can take Viktor Orbán’s statements of yesterday and today at all seriously, I don’t think that the Hungarian government will give in on certain key issues. For example, the flat tax, which is a very important part of the unorthodox economic policies of this government.

So, we can continue to guess about the final outcome of the dueling views of the IMF versus the Hungarian government. This non-debate has been going on now for the last two years.

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33 comments

  1. I am curious about how Index is getting these documents. Are they in the public domain? Or are they being leaked by someone in the government who would like to embarrass OV? If it is the later it may indicate some dissension in the Fidesz ranks.

  2. Pete H. :
    I am curious about how Index is getting these documents. Are they in the public domain? Or are they being leaked by someone in the government who would like to embarrass OV? If it is the later it may indicate some dissension in the Fidesz ranks.

    Well, I guess the IMF keeps copies of their communications and Europe is a small country.

    I like this cartoon. For English speakers, the sign on the cow says “Magyar Marha”. It means literally Hungarian cattle but the word “marha” is also a synonym for “idiot”. So in Hungarian it sounds like “The Hungarian Idiot”.

    While I am at it, here is another lame language joke. There is a “hantavirus” outbreak in Yosemite National Park. Orban must have contracted the “hanta virus” (hanta is meaningless, nonsense talk, lies in Hungarian).

    I really don’t know if I should laugh or cry about this IMF circus but I believe that it is actually bad for the country at this moment if the IMF decides to throw money at it. Because it will be spent on keeping the living standard to get the FIDESZ re-elected for a second term. The debt will go up and the money will be gone in no time. Orban the 5th only wants the IMF to pay his ticket for the next four years. This “marha” will max out our credit cards and by the time we will have a sane government, if ever, our credit will be gone.

  3. Mutt :
    I really don’t know if I should laugh or cry about this IMF circus but I believe that it is actually bad for the country at this moment if the IMF decides to throw money at it. Because it will be spent on keeping the living standard to get the FIDESZ re-elected for a second term. The debt will go up and the money will be gone in no time. Orban the 5th only wants the IMF to pay his ticket for the next four years. This “marha” will max out our credit cards and by the time we will have a sane government, if ever, our credit will be gone.

    THese are my exact thoughts. I was debating if I should post something like this, and I am glad you did. On a certain way does not matter what way things will go because Hungarians will suffer. Not all of them of course. Orban will blame the West and the IMF does not matter if the money arrives or not, but on a certain way if he does not get the money and things really get bad even for those who were not been affected to much, maybe people will take notice. If the IMF will give him the money, the next day Magyar Nemzet’s headline would be, “We won! We told the IMF how things needs to be done and now the whole EU begs for the Hungarian model!’ Yes, economically the money would help, but for how long? Morally would be a low blow. At this point maybe Orban wants to get rid off Pinter, but I think IMF should stick it out to see what happens in the Spring.

  4. “the European Commission projects that by 2020 the debt may be 100% of the Hungarian GDP instead of the current 80%”
    Yup, they must be right then. After all they predicted in 2002 that debt will increase under the socialist-liberal gang from 50% to 80%. Of course they didn’t.
    If they manage to “help” Hungary out as they orthodoxly did in Greece, then 100% is not too bad.

    Read this and learn:
    http://www.marketoracle.co.uk/Article36408.html

  5. Galamus, how does the IMF “bleed out a country financially”? Like it won’t loan money to it?Like Greece? But wasn’t that the uncontrolled government spending?

    These anti IMF guys pretty much like David Letterman – he said he would do anything to look like Brad Pitt, except diet and exercise.

  6. The worst managed country in the history.
    Uganda, under Idi Amin had a chance.
    Where are the few intelligent Hungarians?
    When is the next revolution starting?
    Freedom lost, freedom gone.

  7. It is true that only 10% of travellers pay for using MÁV. So many categories travel free: stufents, soldiers, and people over 65 ( This includes other EU nationals visiting Hungary. They also all get free travel on the BKV, the Budapest Transport system. The authorities believe that Hungarians also get free travel in other EU countries but not so! If inspectors come to check tickets or passes waving a wallet is enough for an elderly person who looks his age.. I moved to Hungary in 1992 and worked and paid my taxes for 14 years. Then I retired. I dont feel guilty about travelling free! I”ve earned it. Peter, Budapest

  8. Some1 :

    Mutt :
    I really don’t know if I should laugh or cry about this IMF circus but I believe that it is actually bad for the country at this moment if the IMF decides to throw money at it. Because it will be spent on keeping the living standard to get the FIDESZ re-elected for a second term. The debt will go up and the money will be gone in no time. Orban the 5th only wants the IMF to pay his ticket for the next four years. This “marha” will max out our credit cards and by the time we will have a sane government, if ever, our credit will be gone.

    THese are my exact thoughts. I was debating if I should post something like this, and I am glad you did. On a certain way does not matter what way things will go because Hungarians will suffer. Not all of them of course. Orban will blame the West and the IMF does not matter if the money arrives or not, but on a certain way if he does not get the money and things really get bad even for those who were not been affected to much, maybe people will take notice. If the IMF will give him the money, the next day Magyar Nemzet’s headline would be, “We won! We told the IMF how things needs to be done and now the whole EU begs for the Hungarian model!’ Yes, economically the money would help, but for how long? Morally would be a low blow. At this point maybe Orban wants to get rid off Pinter, but I think IMF should stick it out to see what happens in the Spring.

    Fear not, gentlemen, the EU and the IMF know well that to feed Orban money would be counter-productive.
    Still, the ‘negotiations’ on the part of the IMF must be conducted professionally in order not to fuel Orban’s anti-EU/IMF arguments. The IMF/EU knows well that Orban does not want the loan. What heroic Hungarian
    would take ‘charity’? I think they’ve got Orban out-flanked: he’s now damned if he does and damned if he
    doesn’t. That seems to be the source of his manic vacillations at present.

  9. HU1776 :
    The worst managed country in the history.
    Uganda, under Idi Amin had a chance.
    Where are the few intelligent Hungarians?
    When is the next revolution starting?
    Freedom lost, freedom gone.

    The fact of the matter is that there are a great number of intelligent men and women in the wings: Bokros, Bekesi, Bajnai, Gyurcsany, Bauer and many, many others. The problem is that there seems to be no counter-balance to a majority in the Parliament. There
    seems to be no power that will face up to the massive
    abuses of a government in power. The judicial branch
    is worthless.

    Ataturk knew well what he was doing when he made the army the final arbiters of power in Turkey.

  10. VALUE OF THE FORINT

    Could some of the powerhouse economic minds reading this blog explain how the forint can retain its level after the last weeks duo fiasco? The euro has remained at 284 and the dollar is at 222. Normally, what has transpired with the Azeris and Orban’s lying about the IMF…would send the forint to 310 and 340 respectively..

  11. I think they’ve got Orban out-flanked: he’s now damned if he does and damned if he
    doesn’t. That seems to be the source of his manic vacillations at present.

    You are right about that. There are hardly anything Orban has done or said that is not very much the opposite of his actions and talks prior or after. This will be one of his legacy, the double talk and double do.
    liberal – conservative
    democrat – anti-democrat
    atheist – religious zealot
    no austerity – hardcore measures
    honesty – “do not listen what I say”
    fit physical appearance – (take a look on the latest photos)
    friend of the West – enemy of the West
    enemy of Russia – friend of Russia
    enemy of communism -puts China up as an example to follow politically and ecobomically

  12. petofi :
    VALUE OF THE FORINT
    Could some of the powerhouse economic minds reading this blog explain how the forint can retain its level after the last weeks duo fiasco? The euro has remained at 284 and the dollar is at 222. Normally, what has transpired with the Azeris and Orban’s lying about the IMF…would send the forint to 310 and 340 respectively..

    Well I am not a financial powerhouse economic mind. But the fact the the ECB introduced a bond program where unlimited bonds are bought against introduction of financial reforms. Has something to do with this. Since Hungary is part of the EU, it seems that other people bailing out Hungary again.

    http://www.forexpros.com/news/forex-news/forex—eur-usd-higher-on-draghi's-bond-program-238028

  13. HU1776 :
    Who is bothered by a minor problem, like Parliament?
    Join MILA, DK etc. for an enlightened Hungary of freedom and happiness.
    Who likes the current culture of Csurka, Szonyi Jozsef, Szabo Dezso, Wass Albert?
    Who lives in Hungary?
    Who is participating in MILLA?
    http://www.facebook.com/sajtoszabadsagert

    Did you post on this blog before? If you did I apologize as I cannot recall, bet even that case you should post something more then a spam here.
    Coming here without saying a peep about anything and posting PR is not helpful for your cause, but quite the opposite. If you want to lobby a cause then say something about it and that way your marketing does not simply look like some litter

  14. petofi :
    VALUE OF THE FORINT
    Could some of the powerhouse economic minds reading this blog explain how the forint can retain its level after the last weeks duo fiasco? The euro has remained at 284 and the dollar is at 222. Normally, what has transpired with the Azeris and Orban’s lying about the IMF…would send the forint to 310 and 340 respectively..

    I see 287 and climbing at http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-huf.en.html

  15. Ron :

    petofi :
    VALUE OF THE FORINT
    Could some of the powerhouse economic minds reading this blog explain how the forint can retain its level after the last weeks duo fiasco? The euro has remained at 284 and the dollar is at 222. Normally, what has transpired with the Azeris and Orban’s lying about the IMF…would send the forint to 310 and 340 respectively..

    Well I am not a financial powerhouse economic mind. But the fact the the ECB introduced a bond program where unlimited bonds are bought against introduction of financial reforms. Has something to do with this. Since Hungary is part of the EU, it seems that other people bailing out Hungary again.
    http://www.forexpros.com/news/forex-news/forex—eur-usd-higher-on-draghi's-bond-program-238028

    I found this very interesting.
    Any idea who or what country would be bailing Hungary out?

  16. gdfxx :

    petofi :
    VALUE OF THE FORINT
    Could some of the powerhouse economic minds reading this blog explain how the forint can retain its level after the last weeks duo fiasco? The euro has remained at 284 and the dollar is at 222. Normally, what has transpired with the Azeris and Orban’s lying about the IMF…would send the forint to 310 and 340 respectively..

    I see 287 and climbing at http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-huf.en.html

    Are you kidding?
    Upset Europe and most of the great powers with the release of the axe murderer…have the
    head of the country palpably lying about the IMF…and the euro moves 3 forints?! With a
    country in this condition the exchange rate should’ve taken off –atleast 10%–but that’s not the case, is it? So, who is supporting the forint and why??

  17. Petofi1 :

    gdfxx :

    petofi :
    VALUE OF THE FORINT
    country in this condition the exchange rate should’ve taken off –atleast 10%–but that’s not the case, is it? So, who is supporting the forint and why??

    Pretty easy answer… if you look at the risk factors and the rate of returns and returns you can get on other investments, the HUF is a perfect investment. As it was explained to me by a funds manager that bought 100,000,000 euros of Hungarian bonds, the downside the models showed was 3% ROI. If normal people could buy… I would have been in there… as it is I have something in an index fund that as long as OV keeps interfering with the exchange rates and the central bank.. I make bank (as the expression goes).

    On another front, out to a friends wine cellar in Tokaj last night. OV came up once and I’d have to say the crowd scowled. No one there believes a thing he says nor do they really trust the media. OV might be able to fool his blind followers but I think the regular Joe is pretty disgusted at the moment.

  18. Jaj!

    You seem to have sent me 11 (eleven) identical mails forwarding the same
    comment. Yes, I know I have just had my dinner with siome nice glasses of red wine, but stilll…

    Peter HD Budapest

  19. Petrovics: “Ataturk knew well what he was doing when he made the army the final arbiters of power in Turkey.”

    I like it when the “democrats” are putting up military dictators as examples.

  20. Louis Kovach :
    Petrovics: “Ataturk knew well what he was doing when he made the army the final arbiters of power in Turkey.”
    I like it when the “democrats” are putting up military dictators as examples.

    Louis K.,

    I’m afraid that Hungarians maybe very far away from being
    able to handle a democratic system, in which case a benevolent
    dictator is the best they can hope for.
    Orban is not it/
    Kover is not it/
    Rogan and Antal are not it/
    And Matolcsy can only qualify as a pig in Orwell’s 1984–

  21. I think I’ve got it. You are sending me a lot of comments meant for a certain Petőfi – but I am Peter!

    Please get it right. Thanks. PETER

    Hungarian Spectrum írta: >> > > > a:hover { color: red; }> a {> text-decoration: none;> color: #0088cc;> }> > a.primaryactionlink:link, a.primaryactionlink:visited { background-color: #2585B2; color: #fff; }> a.primaryactionlink:hover, a.primaryactionlink:active { background-color: #11729E !important; color: #fff !important; }> > /*> @media only screen and (max-device-width: 480px) {> .post { min-width: 700px !important; }> }> */> > WordPress.com> > > body {> font-family: arial;> font-size: 0.8em;> }> .post, .comment {> background-color: white !important;> line-height: 1.4em !important;> }> > > > > > > > > > petofi commented: “> Louis Kovach :> Petrovics: “Ataturk knew well what he was doing when he made the army the final arbiters of power in Turkey.”> I like it when the “democrats” are putting up military dictators as examples.> > > Louis K.,> > I’m afraid that Hungar” > > > >

  22. HU1776 :
    Who is bothered by a minor problem, like Parliament?
    Join MILA, DK etc. for an enlightened Hungary of freedom and happiness.

    I like this specific advert :-).

  23. Orban, in his ham-fisted, lying, ways is complaining about IMF’s supposed austerity requirements. It would be interesting to speculatew whether these measures would’ve been
    necessary in mid-2011 if the government would have been more concerned with economic
    realities than scoring nationalistic points…

  24. A quote from enufff’s link:

    “Varga said the kuruc.info website was unpopular with and considered “far-right” by the Hungarian authorities, which he described as a “Communist liberal government.”

    He said kuruc.info focused on criticism about various groups — including “Jews, gypsies and Hungarians” — whom the writers believed were perpetrating various misdeeds.

    He said some of the 20 or so kuruc.info writers “leaned toward Nazism” but that “others were more moderate.”

    “It is a no-holds-barred website,” said Varga, who said he valued freedom of expression.

    “In a healthy society, we have to tolerate differences,” he said. “As long as the grievances are expressed in a peaceful manner.””

    Just how barking loony are these people? The fact that they think Fidesz is a “Communist liberal government.” should give us quite a big clue…

    The link again:

    http://healdsburg.patch.com/articles/healdsburg-shop-owner-denies-ownership-of-far-right-hungarian-website

  25. I’m afraid that Hungarians maybe very far away from being
    able to handle a democratic system, in which case a benevolent
    dictator is the best they can hope for.

    There is no such thing as a benevolent dictator, particularly when a country’s literacy rate is above 90%. Turkey’s rate a century ago was about… 10%.

    Hungary cannot compete economically either on natural resources or on unqualified labor. What’s left? Creativity, innovation – which you don’t get with a dictatorship, however ‘benevolent’.

  26. Marcel Dé (@MarcelD10) :

    Hungary cannot compete economically either on natural resources or on unqualified labor. What’s left? Creativity, innovation – which you don’t get with a dictatorship, however ‘benevolent’.

    Quite. Especially if you ruin higher education and let your best people leave the country.

  27. As a Hungarian descendant, I find it easy to believe all this criticism. Does anyone have the solution of a different kind, besides the Prime Minister Orban? Can it be you have to just “vent”your criticism? I will continue to believe the best for you all, I am on USA soil, but the Hungarians in Hungary are very much on my mind and in my heart.

  28. Coraz większa ilość interes w Polsce dostrzega siła jakie niesie ze sobą turystyka.

    W ten strategia jesteśmy w stanie używać z raz po raz większej liczby form turystyki i
    w naszym kraju.

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