The Hungarian central bank goes on a buying binge

It was on August 3 that I first read about the so-called Borbély castle in Tiszaroff. It was refurbished after the change of regime and was owned by a German businessman who made a four-star luxury hotel out of it. In the wake of the recent downturn in the economy, however, the business failed, and the owners put the property up for sale. The article I read in Vasárnapi Hírek reported on rumors circulating in the village that the Hungarian National Bank had purchased the castle for use as a vacation resort for the central bank’s employees. And indeed, a week later it became official. The bank purchased the property for €1.3 million (415 millon HUF).

Kester Eddy, a reporter for the Financial Times, had a great time writing a story about the purchase. It reminded him of the days when, under communism, state companies and institutions owned holiday properties so their employees could spend two weeks splashing around in Lake Balaton. The bank struck back and explained that “the Magyar Nemzeti Bank, like other EU central banks, seeks to provide its more than one thousand employees with fringe benefits.” Moreover, the castle-hotel is located in the country’s least developed region and by opening the hotel again “more than 30 new jobs have been created.” Between May and the end of August it will function as a recreational center and between September and April as a training center.

The Borbély Castle-Hotel in Tiszaroff on 3.5 hectares

The Borbély Castle-Hotel in Tiszaroff on 3.5 hectares

Earlier the Hungarian National Bank had seven different vacation homes, but by 2009 the bank sold them off one by one. In these still difficult economic times it is hard to justify buying a luxury hotel even if the price was apparently attractive. The owners asked 680 million forints for it, but the bank managed to purchase it for a mere 415 million. Moreover, Matolcsy pointed out that the bank had earned a profit of 26.3 billion forints and therefore the purchase did not cost taxpayers a penny. An interesting explanation from a central banker.

The brouhaha over the purchase of the castle-hotel had barely died down when HVG learned that the Hungarian National Bank also bought perhaps the most expensive office building in Budapest, the eight-story Eiffel Palace. Originally it was rumored that some of the offices of the central bank would be moving into the building. Portfolio thought that purchasing a class A office building was an acceptable business concept. Others were less sanguine. For example, the popular blogger According to him, the price was €57.5 million (18 billion forints) and the building has 14,000 square meters of rentable space. In calculating the potential return on this investment he assumed the top rental rate for space in a green building, €13.5 per square meter. In downtown Pest 86% of the available office spaces are occupied. If the Eiffel Palace has the same occupancy rate its gross annual rental income would be €1,950,480. Assuming an 80% profit and 10% tax, the net rental income would be €1,404,346 per year. That means a return of 2.44%. Five-year government bonds have an interest rate of 4.70%. So, says the blogger, this deal does not sound so fantastic to him.

According to critics of the deal, the Hungarian National Bank grossly overpaid the owners of the Eiffel Palace. They paid almost 18 billion forints when according to real estate assessors it is not worth more than 11-12 billion. E-PM will go to court in connection with the purchase of the office building because it suspects malfeasance or a breach of fiduciary responsibility on the part of the central bank.

But these two purchases were nothing compared to yesterday’s revelation. HVG learned that the central bank had transferred 200 billion Hungarian forints to its five foundations named after Pallas Athena, the goddess of wisdom, courage, inspiration, civilization, law and justice, just warfare, mathematics, strength, strategy, the arts, crafts, and skill. A perfect description of Hungary today!  This amount is one and a half times more than the Hungarian government spends a year on higher education.

Initially it was known only that this money will be spent on education. Today the central bank released details of its project. “We are creating a faculty of economics and finance at Kecskemét College, a faculty of finance in Marosvásárhely/Târgu Mureș (Romania), a doctoral school in the Buda Castle, and an intermediate financial training center in Pest.” The reason? “The already obsolete doctrines and mistakes of the neo-liberal school of economics continue to dominate Hungarian education in economics and finance.” Since Matolcsy thinks that mainstream economists in the country–and that means practically all respected experts–are wrong and since he cannot get rid of them, he will build parallel economics departments that will teach his unorthodox economic theories. Just as the Orbán government needs an alternative Holocaust Museum and an alternative academy of artists it also needs a new set of economists who will be the high priests of unorthodoxy.

Matolcsy admitted that it will be an expensive undertaking because, after all, they need “new institutions, professors of new vision, and new teaching materials.” Creating new institutions will probably be the least of Matolcsy’s problems. Where will he find those professors of new vision? Where is he going to find new teaching materials? Perhaps he is planning to write them himself because I can’t believe that any self-respecting economist would be willing to write textbooks acceptable to Matolcsy.

I tried to find out more about the institutions mentioned and, as far as I can see, only two seem to exist. The Kecskeméti Főiskola at the moment does not teach economics. It has one section that produces elementary school teachers, another where they teach information science, and another that specializes in what Hungarians call “kertészmérnöki kar”–less elegantly put, gardening and landscaping. This college was established in 2000, i.e. during the first Orbán administration. The second institution, in Marosvásárhely/Târgu Mureș, is not mentioned by name, but I guess it is the Sapentia Hungarian University which was established in 2001 and heavily subsidized by the Hungarian government. I remember that shortly after the 2010 election Viktor Orbán made a trip to Târgu Mureș and gave a billion forints to the institution. As for the others, I assume they will be established sometime in the future.

I used to think that I could not be surprised by anything that is done by this administration, yet I am surprised time and again. It is really frightening how much power is in the hands of people whose sense of reality is greatly impaired.


  1. Hungary became the private property of a dozen Fidesz hoodlums and all the people in the country are their serfs. The Hungarian people deserve what they got, since they don’t rebel against it.

  2. “Just as the Orbán government needs an alternative Holocaust Museum and an alternative academy of artists it also needs a new set of economists who will be the high priests of unorthodoxy.”

    It seems that this country is in urgent need of an alternative government.

  3. In fact there is a very relevant article published on August 26th on
    The article is very much about how in 2012 Orban made a huge fuss about how his government will close all the doors on offshore companies. In the new constitution it is clearly defined that offshore companies cannot get any public funding, etc. THey even published the names of companies on a wall of shame.
    Fast forward to today when the Basic Law -as Fidesz likes to call it, become obsolete for Fidesz.
    THe Eiffel Palace mentioned above by Eva, is purchased from offshore companies registered in Cyprus and the Antilles. It is impossible to figure out how much money and to whom Matolcsy transferred to.
    “The President of the Hungarian National Bank will never speculate again off-shore.” said Orban in 2013. THat was then of course.
    By the way the Casino concessions that were handed over on a silver tray to Andy Vajna are also went to Andy’s offshore company. (The company he is involved with.)
    In fact it is very hard to follow even the number of offshore connections of current Hungarian ministers and their wives, and so forth.
    Here is a list:

  4. In April, Viktor Orban gave the following answer to the question “How does it feel that the taxpayers essentially built a stadium next to the Prime Minister’s house?”
    “People should understand that the money is produced by the entrepreneurs, and the entrepreneurs decide on who to give it to. […] This is the entrepreneurs’ money, they used it, so it is not public fund.”

    Of course Orban forgot to mention the money from the ministry
    Financial support
    2012 from 2,970,000,000 forint 144,900,000 forint from the Ministry of Human Resources
    2013 from 7,100,000,000 forint 726,000,000 forint (460,000 EUR) from the Ministry of Human Resources

  5. HUF 200bn is an unbelievably high amount in Hungary. For Americans: at purchasing power parity it is equivalent to about 2bn USD and that in a small, poor country.

    To privatize (steal) that amount arguing it is “not public money” as Matolcsy did is insanity. Most of the money will obviously be stolen via “legal” transactions at such private foundations. The foundations will be set up by the bank and the bank can donate any money to it at any time, but the foundations will be formally independent from the bank. Of course the leaderships of the foundations will be made up of trusted fideszniks, but legally the bank (or anybody else) cannot control these foundations.

    And this is only for this year, apparently Matolcsy at the behest of his fidesznik overlords will privatize the profits of the National Bank from now on.

    Matolcsy argued on (a new media web site which is owned partly by his cousin) that the bank only has an obligation towards the central budget (the taxpayers) if it makes a loss because then the budget has to cover such losses. But if the National Bank makes a profit then the bank (leadership) can do whatever the hell it wants to do, because the bank is formally a private entity according to law, a company limited by shares though owned by the state outright, but it is not a state administration entity like a ministry.

    This is such a grand larceny, a scandal of incomparably epic proportions that any opposition party would have to scream — as Fidesz no doubt would do — at the top of their lungs that these foundations would be nationalized and the decision makers (lets put aside the fact that the prosecution is owned by Fidesz) will immediately be put into jail. But just as it was discussed here yesterday, the opposition is lying brain-dead.

  6. Eva@ “Just as the Orbán government needs an alternative Holocaust Museum and an alternative academy of artists it also needs a new set of economists who will be the high priests of unorthodoxy.”

    Re: government involvement in the economy – how about starting with Noble Price winner: Joseph Stiglitz, he believes in the role of government in the economy….(and he’s considered a Liberal/Lefty)

  7. Re Marcel’s comment about far-right activists fighting Putin’s war for him (and it’s not just the French, this seems to be the loony right’s equivalent of ISIS), it’s strange that my Fidesznik family and friends most often used description of the legitimate Ukrainian government and their supporters is “fascists”.

  8. On the same subject – I wonder if there are an Jobbik ‘skinheads’ out there, fighting with/for the Russians?

  9. And again, on Ukraine – the BBC news this morning was doing a piece on possible new EU sanctions against Putin, following the latest Russian incursions. The EU countries were described as mostly being in favour of sanctions “except Hungary”.

    My heart sank. Prior to 2010, it was rare to hear or read anything about Hungary, and when I did I was nearly always proud of my adopted country. But now, mentions of Hungary are all too frequent, and they are invariably embarrassing, if not downright depressing.

  10. Some people are getting livid. The linked tumblr picture is a “hungaricum”, so it might not be clear to non-Hungarian speakers, but this is really on-topic.

    Matolcsy’s story (his “steal of the century”, although he is not yet finished) is complicated by the fact that Matolcsy and his fidesznik pals very recently engineered the de-merger, separation of an until now single municipality on the north shore of Balaton (Balatonakarattya into Akarattya and Kenese) so that Matolcsy’s wife can be the local mayor. She wanted the job and she will get it, takes what it takes.

  11. @Paul

    I think you are spot on. It is most probable that Jobbik’s fans are fighting on Russia’s side. During the Yugoslav war many Hungarians went to fight on various sides of the conflict. Interestingly mostly they fought on the Serbian side, which otherwise was not kind to local ethnic Hungarians but the Serbs paid well and welcomed anybody who wanted to kill. Given that the various paramilitary organizations close to Jobbik are extremely well organized and trigger-happy, and Russia-loving of course, and Ukraine is also just a couple of hours away by car, I think it is most likely that there are many such Hungarians out there.

    On the other hand Jobbik consistently toned down its extremist side, because probably the political advisors thought that it was helpful in the longer run and indeed the more domesticated image helped Jobbik nApril even if jobbikniks felt that the election results were a disappointment. Jobbik is now a completely mainstream party in Hungary, there can be no question about that. Apart of some intellectual circles Jobbik may be seen as amateurish, not ready to govern, not charismatic, visionary enough, but Jobbik is certainly mainstream now. People also reject leftist parties like MSZP or DK much more than they do Jobbik.

  12. @Paul: I suspect your amazement is ironic. Ultra-nationalists love each other… until they hate each other. The only far-right group that ever existed at the EP blew away quickly when an Italian member uttered things about Romanians that Romanian members found very offensive 🙂

    And for a couple of years now, the Russian nationalists’ charm and money offensive towards Western radicals (Hungary included) has made most far-rightists break up with Ukrainian ultras. When the Maïdan riots erupted, The Front National website promptly deleted the reports on Svoboda leadership being received in 2010 by Le Pen Sr – well, not promptly enough. And Vona had some tough words for them a couple months ago.

    That said, I’m afraid there are many more French (and Brits) in Iraq & Syria than in Eastern Ukraine. I posted the link to the article because of the unsurprising Budapest connection.

    @Karcsi: completely mainstream?

  13. and now, something about the profit of the central bank

    Briefly, CB makes profit when e.g. the exchange rate of the country is weakening. Then, suddenly, the domestic value (= in HUF) of net foreign assets (= foreign reserves) in the central bank balance sheet is going up and as a result there is larger ammount of CB´s profits.

    It seems that there is a close cooperation between the Hungarian government and the CB – the government with its non-conventional economic policy brings HUF to depreciation and the CB has more profits at disposal, et cetera…If they really do it consciously, it would be the highest level of sophisticated tunnelling of the country.

  14. @Marcel Dé: not for you, me or for political scientists but for an average Hungarian voter Jobbik is absolutely mainstream now, a household name. This is the bloody reality.

  15. More than likely the French veterans fighting for the separatists are former French Foreign Legionaries who are in fact Russians. When I was in the US military I did a joint training exercise with the 2e Régiment Étranger d’Infanterie out of Nimes France, a good number of them were former Russian paratroopers who had fought in Afghanistan. These Russians were highly professional and competent in logistical issues, several spoke not only Russian and French but also English. I would suspect that there is a conduit for Russian recruits into the Legion. Effectively they are mercenaries and once their enlistment is up with the Legion I could see them going to the Ukraine.

    More than likely they were provided with about a two million dollar life and dismemberment insurance policy and at least $100,000 was deposited in a secured account for each of them plus what the Russians will pay them regularly. I also have no doubt the CIA/NSA has mercenaries at least advising the Ukrainians if not in actual combat.

    I am so upset about President Obama’s press conference yesterday where he stated Russians have crossed the border in force and then in the next breath said the US had no intention of using any US assets to repulse the incursion that I am incapable of rationally commenting on it in detail. My disturbance at the President is shared by many retired military officers and NCOs. The common thought was its bad enough not to be doing anything, but to publicly announce it is simply an invitation for further aggression.

  16. @Istvan: far be it from me to alter the myth of the Foreign Legion, but these guys have another profile. Among the group of four mentioned in the article – they also have been filmed as this has become quite a PR stunt – there are two army veterans, both French citizens (one is a dual Serbian-French national). None former legionaries, both Afghan vets. A couple older guys in their fifties have also spoken to the press, undoubtedly French citizens with a past in Burma (the Karen guerrilla in the ’90s) and probably the Yugoslav wars.

    Since the last defense of Hitler’s bunker in April-May 1945, there’s some kind of a tradition of ‘lost soldiers’ among the French far-right. In 1972, Le Pen Sr founded his party with a number of former French Waffen-SS volunteers… these guys are merely following in the footsteps of their inglorious predecessors. Contrary to professional mercenaries, their motives are ideological – and they’ve almost constantly been on the losing side.

  17. @trafo

    “This is such a grand larceny, a scandal of incomparably epic proportions that any opposition party would have to scream…”

    Silence is the sound of money changing hands–

  18. By the way Tamas Frei, the TV reporter is also an IMO guy though he did not graduate. He lives in “exile” and is at least a Russland-versteher now and his facebook page has significant connections to Kiállunk Oroszország mellett (We stand by Russia – a Hungarian facebook page). The Russians are really everywhere.


    Albert Gazda is from Kárpátalja, but in his case this is a strength (speaks Russian etc.) and does not mean pro-Fidesz madness. Pretty good analysis.

    Putin is not stopping now, and the West does not care (just as it did not in 1956). Putin will probably conquer 1/3 to half of Ukraine and he will be “crowned”, as the people just adore him and want more of him. This is Novorossia and it is a term that is now used by the official media. No other leader since Staling or Peter the Great conquered so much new land as did/will Putin. Nobody cares about the costs of maintaining the conquest, this is a future issue,Putin will deal with it when he gets there.

    The security council can do whatever the hell it wants Russia has the nukes, the oil and the veto power. Case closed.

    Putin plays for the history books, and there is nobody stopping him now.


    Somebody at Citibank wants to sell the Matolcsy steal as a kind of QE, ie. the private foundations will purchase government debt securities to the tune of about 0.7% of the GDP and this not against EU rules. (Although this would tie in with the legal thinking of Fidesz).

    This research report is both funny and idiotic, like purchasing real estate for double price from off shore companies which will immediately transfer their sales price abroad is implied to be a legitimate balance sheet growing strategy. Ridiculos and sad.

  21. Marcel and Karcsi,

    “Jobbik is now a completely mainstream party in Hungary, there can be no question about that.”

    Their views are certainly now mainstream and not just now amongst the working-class.
    The government follows an agenda on the question of race, “foreigners” and the principles behind institutions such as the EU which differs very little from Jobbik’s.
    Anti-Semitic journalism is not only tolerated but actually is produced from personal friends of Orban. Fidesz mayors persecute Roma in villages and towns throughout Hungary

    The only difference between a Jobbik and Fidesz politician or indeed voter is style and perhaps level of naivety.

  22. Re Russia’s activities:

    I just posted this on

    Other countries are also taking a hard look at Russia:

    “Poland has said that it will allow the plane of Russian Defense Minister Sergey Shoygu to fly over its territory if the plane changes its status from military to civilian. Earlier the country barred its airspace to the plane.
    The minister was returning from the celebrations of the 70th anniversary of the Slovakian national uprising that took place in the town of Banská Bystrica.
    The plane had to take a U-turn and landed in Bratislava an hour later.”
    That must have hurt his pride …

    If you want to see “The Russian soul” read the comments on this by Putin’s fans – but be warned! These people have a very warped understanding of today’s world – Putin is the greatest, all the former Russian satellite countries are nothing and should be invaded immediately and brought back under Russian control.

  23. “Maybe nothing will come of this. But whatever happens from here on, I think we can say that Fidesz seriously underestimated the Norwegians and probably picked a fight with the wrong people.”

    I have mentioned this on here several times to the resident Fidesz admirer- not only have the Norwegians refused to raise the white flag and hand over the funds to the Orbanists but the NGOs have also stood firm against the increasing intimidation from the regime.

    Lazar is apparently incandescent with rage at their cheek. The regime picked two unnecessary fights- one against RTL and the other against the NGOs. Orban has listened to closely to the idiots now closest to him who told him he would get a surrender on both fronts. He now has to decide whether to up the ante or to walk back- a lose-lose for the Fidesz regime.

  24. D7 Democrat, as far as I am concerned I absolutely applaud the Norwegian resolve and determination. This the the way to lead – by example. They are people who – at last – care. One can’t ask for anything more.

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