Bad news all around: Economic and political troubles brewing in Hungary

I have the feeling that the Regime of National Cooperation is falling apart at the seams. Or at least there are signs that point in that direction. The CEO of MTI, the tsar of official Hungarian news, announced his resignation. He is leaving his post at the end of the year. One of the  assistant undersecretaries in charge of education also said that he was leaving, but it looks as if Zoltán Balog, minister of the mega-ministry to which education belongs, must have put pressure on him to stay until spring. I guess the assistant undersecretary no longer felt that he could lie into the faces of the teachers.

Oh, yes, because the ministry’s officials in charge of education have been lying all along to the teachers about the salary hikes. György Matolcsy and Viktor Orbán on their own volition decided to offer a postponement of the salary increases to the European Commission in exchange for lifting the excessive deficit procedure that has been in effect against the country since 2004. The two teachers’ unions were already on the verge of deciding on a strike. As soon as they learned the news from Népszava this morning they decided that they will indeed call for a strike.

Then it looks as if MSZP is beginning to regain its former strength. Ipsos came out with its latest poll and 33% of the active voters would vote for the socialists as opposed to 41% for Fidesz. The gap between the two parties is narrowing every month. In addition, Medián, another pollster, measured Gordon Bajnai’s popularity against that of Viktor Orbán among voters who still haven’t made up their minds about their party preferences. Bajnai beat Orbán 38 to 22. Not good news considering the size of the uncommitted voting bloc.

Then there is the issue of the alleged negotiations with the IMF. Benoite Anne of Société Générale, a specialist on the economies of the region, severely criticized the Hungarian government strategy concerning negotiations with the IMF. Investors might be misled for a while, but because of  the Hungarian government’s shenanigans in the end “the poker game will be lost.” Half a year from now the situation with the IMF will not have moved an inch. What Hungary is doing is a gamble which will result in a “bloodbath.” That is, the whole shaky financial edifice built on sand will simply collapse.

Even the conservative Polish paper Rzeczpospolitausually very friendly to the current Hungarian government, claimed that Orbán miscalculated the situation. The IMF has time while Orbán doesn’t. If  two years ago, or even a year ago, Orbán had decided to make a deal with the IMF, today he wouldn’t have to raise taxes that will slow the economy and give rise to popular discontent.

Oh yes, discontent. I already mentioned the impending teachers’ strike, but I should add that the contour of future cooperation among the opposition groups is shaping up. Gordon Bajnai, according to people close to him, “is preparing an important speech” for his appearance at the Milla demonstration. Moreover, as of today Bajnai’s foundation “Haza és Haladás” (Homeland and Progress) became an “association.” The founding members of this association, besides Gordon Bajnai, are Péter Oszkó, finance minister in Bajnai’s government; Péter Balázs, Bajnai’s foreign minister; Viktor Szigetvári, MSZP’s campaign manager in 2006 and 2010; Péter Felcsuti, former head of the Bankers’ Association; and T. Károly Vörös, former editor-in-chief of Népszabadság. The aim of Bajnai’s new association is to act as a catalyst for wider cooperation among the diverse groups and to assist in bridging the political and ideological differences among them. I’m a bit more optimistic now about a possible common front than I was a few days ago.

Viktor Orbán at the press conference in Brussels
MTI / Tibor Illyés

But I left the best to last. Viktor Orbán is in Brussels again at the summit. There he made wise comments about the “complete financial, economic and political integration of the eurozone.” Every time I hear Orbán say such things I can hardly believe my ears. But I guess he promised Angela Merkel that he would support her at the summit, and since Hungary is so beholden to Germany he obliged, although who knows what he will say tomorrow once he is back in Hungary.

But the really important news from Brussels was the surprisingly speedy reaction of the European Union to the second Matolcsy austerity program. Who says that the European Union is a sluggish organization? It seems that there are times when the bureaucrats can make up their minds really quickly–when they don’t like something. Well, this is what happened to the latest Hungarian attempt at avoiding losing billions and billions of euros as of January 1, 2013. Whatever Matolcsy came up with is not quite enough. We don’t know exactly what the objections are to the latest budget proposals. According to Orbán, the European Commission found the planned measures to be “almost enough.”

Orbán took the news meekly. This time there was no sign of his usual militant response. On the contrary. He announced that the Hungarian government will do everything to satisfy the demands of the Commission. I assume that the Commission’s response came as a surprise to the Hungarian prime minister. Otherwise he wouldn’t have had to hold a conference call with his cabinet.

The Hungarian government is asking the Commission “to give the exact amount” it deems sufficient to keep the deficit under 3%. Where is Matolcsy going to come up with the necessary amount? From the same sources that most likely will further slow the economy, already in recession: taxes on banks, utility companies, energy, and the online gambling.

But I have the feeling that better economists in Brussels than György Matolcsy would most likely suggest an entirely different approach to the deficit. Perhaps someone could explain to the Hungarian prime minister that György Matolcsy’s retirement would be a good first step. Because according to most people trust in the current Hungarian government cannot be restored. But that would be only a first step. The next would be a complete turnabout in Hungary’s economic policies. But I don’t think we can expect that as long as Viktor Orbán is the prime minister of Hungary.



  1. petofi :

    spectator :

    A greatest con artist at work in the recent history of Hungary.

    I agree with all you wrote…but my question was: How do you wean the ‘Orban-believers’ off the teat of Fantasy that Viktator has got them on?

    I think the first step should be – my professional opinion – to make the people aware, that they have been conned, the emperor indeed has no clothes on. That’s why I – for one – go after the source of the Orban’s speeches, or calling attention of the textbook social-engineering aspect of his conning, because I think, this is key element.
    However, since I’m quite a bit away, let alone, I have nothing to do with politics, it should be done by professional forces at home, political and media alike.

    And it should start right away – it takes time before you can even register any kind of effect, let alone see some result.
    Unfortunately, the political actors still living in dreamland, they still think, that doing the ‘right’ thing is enough, the people will act upon it right away.
    Totally wrong.
    The ‘good guy’ – as perceived by the common audience – isn’t the one, who’s doing everything right, but who ‘appears’ as doing everything right.
    Quite significant difference, I would say.
    It means practically, that doing ‘right’ things is not enough, you must look the part too, in order to be accepted as the ‘good guy’. Here comes the communication and marketing into the picture, which in effect could show up just the right image, if they know, what they’re doing.

    Sorry to be so didactic (professional hazard) – I’m pretty sure, that this area is one of the pitfalls of the opposition.
    I hope, that they have the sense and help it, otherwise there is no way to get anywhere.

  2. Just a small example of the economic misery and what it might mean to the populace:

    Yesterday my wife got (via Tesco) a loan offer from the Budapest Bank.

    500 000 HUF – to be paid back in easy monthly installments of around 15 000 HUF

    Everybody might use this to buy a nice used car, not too old …

    The only problem is:

    It will take you 72 months to repay – i e you pay back more than one million,which means the effective rate of interest is around 30 %.

    So the car might be long gone while you still pay your monthly 15 000.

    To me that kind of business looks like usury or Mafia …

    PS: Reminds me of an US pop song from the 1950s:

    A Dollar down and a Dollar a week …

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