austerity measures

Viktor Orbán on the world stage and at home

Every second Friday Viktor Orbán spends about twenty minutes with a servile reporter from Magyar Rádió who asks the great leader about his achievements and plans. But before I cover the latest pearls of wisdom coming from the prime minister I want to share some thoughts about an unexpected private meeting between Chancellor Angela Merkel and Viktor Orbán preceding the European Union Employment Summit held in Milan on October 8.

Critics and opponents of Viktor Orbán’s domestic and foreign policy initiatives were dismayed over news of the meeting. Just when the United States finally seems to be showing signs of greater resoluteness in its dealings with the Hungarian government, Angela Merkel rewards him with a private meeting. Hungarian opposition papers pointed to Merkel’s broad smile and assumed that the encounter had to be friendly. But this might not have been the case. Of course, we don’t know what transpired during the meeting, but there are a few signs that may indicate a less jolly encounter than Merkel’s smile would indicate.

The official government website republished the MTI summary of the encounter, based on information supplied to the news agency by the prime minister himself. What can we learn from that brief description? “First and foremost [they] talked about foreign affairs.” The second topic was energy policy. As far as foreign policy is concerned, I assume the topic was Hungary’s reluctance to support the common EU resolve concerning further sanctions against Russia if necessary. It is also possible that Merkel mentioned her disapproval of Viktor Orbán’s eastern orientation. When it comes to the country’s energy policy, I’m almost certain that Merkel brought up Hungary’s sudden decision to stop sending natural gas to Ukraine three days after the CEO of Gazprom paid a visit to Viktor Orbán.

How do I surmise that? A careful reading of this short report on the meeting makes that interpretation more than plausible. Let me quote the appropriate passage verbatim: “Hungary will be part of the common European efforts, but at the moment she must establish her own energy security. Thus, Hungary now is busy with feeding its own storage facilities.” After January 1, 2015, when the Slovak-Hungarian gas pipeline is functioning, “we will be able to send non-Russian gas to Ukraine, if our Ukrainian friends would like it.” I should call attention here to Orbán’s emphasis on the source of the gas intended for Ukraine. That strongly indicates that he agrees with the Russian position that selling Russian gas to countries outside the EU is illegal.

As for the possibility of a discussion between Merkel and Orbán on Hungarian-EU relations, my source is Viktor Orbán’s Friday morning interview. While until now we have heard only criticism from Orbán concerning the West, which is in decline and on the wrong track, during the interview Orbán praised German economic strategy. The German mentality of hard work and prudence is the basis of  successful economic policy. I might add here that praise of German economic strategy was somewhat ill-timed in the wake of dismal economic news from the country.

As far as future domestic policies are concerned, the Friday morning interview was singularly uninformative. There has been much talk lately about a new era coming, but Viktor Orbán refuses to provide any details. A careless remark by Mihály Varga a couple of weeks ago prompted speculation about the introduction of new austerity measures. Rumor has it that the government cannot hold to the 3% deficit, which may followed by the reintroduction of the excessive deficit procedure by the European Commission. And that would mean turning off the money spigots from Brussels. A government denial followed Varga’s remark, but people are not convinced that austerity measures are not in the offing. The budget that should already have been presented to parliament is still nowhere. According to Orbán, he and Varga will go through the numbers this afternoon.

There was only one topic on which Orbán was more expansive: his ideas about education. Specifically, producing skilled workers. He has big plans for something he calls “dual education,” which will produce a highly skilled workforce. After a student has been in school for eight years he would enter a course of study that would combine some academic study with hands-on work experience. It would be a kind of apprentice (inas) program. There is nothing new under the sun. Many of us still remember Nikita Khrushchev’s introduction of precisely the same type of education. We also remember that it was a huge flop and the experiment was abandoned. I guess Orbán thinks he can do a better job.

But if Khrushchev’s experiment was a bad idea in the 1960s, it is a terrible idea today. Who thinks that eight years of elementary education are enough to produce highly skilled workers who nowadays need higher math, computer skills, and–most likely in Hungary’s case–the command of a foreign language, just to mention a few requirements? The very word “inas” (apprentice) conjures up images of the little boy who was apprenticed to a master and who was terribly exploited by him. He lived with the master’s family and often did all sorts of things that had nothing to do with his future trade.  But in those days one didn’t need a lot of education to learn how to make shoes or to become a bricklayer. Today I would say that to become a skilled worker one should finish high school and have at least a two-year associate’s degree.

journeyman

Back to olden days

I agree that training a skilled workforce is needed, but Hungary is unlikely to be a country where industry dominates. The service sector will most likely remain the mainstay of the economy, as elsewhere in western countries. Moreover, it is not true, as Orbán claims, that “the road to successful life is through crafts” because statistics prove that university graduates’ compensation greatly exceeds the salaries of non-graduates. I fear, however, that he will introduce his ridiculous ideas on education very soon. He promises such legislation this year. I wonder what impact such a reorientation of education will have on the current educational system, which has already gone through a very hard time because of the nationalization and centralization of all public schools. One could also ask where they will find teachers by the thousands to instruct students to become skilled workers by the age of 16 or 18. What will happen to those teachers who today teach academic subjects? The whole thing sounds not only crazy but injurious to the country.

This year was spent mostly on campaigning for three different elections, and therefore the Orbán government had relatively little time to come up with ever new ideas and proposals that become law in record time. I fear this legislative respite is over, and the prime minister will have quite a few surprises for us in the coming months.

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Another austerity program introduced in Hungary, but they call it a “freeze”

It was not quite a month ago, on June 20, that Mihály Varga, minister of national economy, triumphantly announced that he “convinced the European Commission that no further austerity measures are necessary for Hungary to keep the 2.9% deficit target” that would ensure the receipt of investment funds from the European Union. Previously the Commission had expressed its misgivings about the feasibility of achieving the prescribed goal. According to Varga, the Commission was impressed by the recent positive results of the Hungarian economy: low inflation and rapidly decreasing unemployment figures.

So, great was the surprise that, after all, the government ordered a freeze of 110 billion forints worth of government expenditures in order to make sure that the deficit target is met. Varga tried to calm the nerves of Hungarians by saying that the freeze “will not affect families and businesses.” So, what will it affect? It looks as if Investment Fund expenditures will be substantially affected and several projects will be postponed. Across all ministries there will be an almost 40 billion forint spending freeze. Reserves for extraordinary measures, like floods, snowstorms and such, will be greatly reduced. The freeze will lower the GDP by .036%. He emphasized that these measures are not really necessary; they are only precautionary.

Yet Varga gave himself away once he began listing the reasons for the freeze. He explained that the favorable economic developments of late had actually had a negative effect on the state’s budget. For instance, a lower inflation rate than expected reduced excise tax and VAT revenues. Moreover, he added that “Hungary is facing some possible punitive measures from the European Union” which would affect certain funds coming from Brussels. Commentators judge that figure to be close to 100 billion forints. As for lower tax revenues, Varga could have added that due to the newly introduced state monopoly of tobacco the state lost about half of its former revenues from this source. Varga of course did not want to mention the substantial expenditures on the nationalization of several large private concerns. In addition, thirteen infringement procedures are currently underway, the latest being an impending fine to the tune of 60-90 billion forints over the tenders for the toll system introduced about a year and a half ago. All in all, the budget is not in great shape.

According to Levente Pápa, an Együtt-PM politician who deals with economic matters, the government has loosened the purse strings of late. The public works program was greatly expanded just before the national election. The same will be true in the coming months, this time because of the municipal elections in October. Sándor Burány of MSZP, who usually responds to issues connected to the economy, also called attention to the so-called “prestige projects” undertaken for the election year.

This morning Viktor Orbán explained the reason for the freeze. This year’s budget is tight, “at the very edge” of 3%, and thus it is a good idea to make it clear to the whole world that Hungary will hold the deficit under the maximum allowed. Then he tried to teach the Hungarian public, which is not too sophisticated when it comes to economics, that “Hungary must continually take up loans in order to finance its earlier loans and it is not immaterial under what terms the country gets these loans. Interest rates are greatly influenced by whether investors consider the budget stable.” Hence the freeze.

At this point the servile reporter who conducts these Friday morning interviews asked Orbán whether it hurts that the building of stadiums must be suspended. Naive man. Orbán announced that “luckily” one does not have to worry about these projects. There is always money for the prime minister’s pet projects. Moreover, he said that some of the expenses connected to stadium construction will occur only next year. Let’s worry about them then.

It is certainly worth taking a look at yesterday’s Magyar Közlöny (Official Gazette) which contains the details of this latest adjustment of the budget figures. The three ministries affected most are the Ministry of Human Resources (9,671.1 million), Ministry of National Economy (8,378.3 million), and Ministry of Agriculture (5,552.0 million). It is true that the Prime Minister’s Office will be able to spend less money from here on (1,446.5 million), but that is a relatively small cut, especially if we compare it to the 3,785.5 million taken away from projects financed by the European Union.

Even more interesting is appendix #2, which lists the exemptions. These are projects that the ministries cannot touch while adjusting their budget figures. One of the first is the prime minister’s protocol expenses. But no one can chip away at the enormous “government communication” budget either. Although I did not know that Viktor Orbán was keen on horses, the “development of the Horse Center in Szilvásvárad” is also exempt. The reconstruction work in the Castle District (Szent György tér, Mátyás templom) must go on. The Ludovika Campus reconstruction, including sports facilities, will continue uninterrupted. This is where military officers and civil servants will receive a proper Fidesz education. Monetary gifts for excellence in sports must remain the same as before. And then we have an incredibly long list of stadiums and sports facilities: Győr, Debrecen, Bozsik Stadium in Budapest,  Ferenc Szusza Stadium also in Budapest, Pécs, Nyíregyháza, Zalaegerszeg, Kaposvár, Kecskemét, Paks, Pápa, Békéscsaba, Mezőkövesd, Siófok, Dunaújváros, Gyirmót, Ajka, Balmazújváros, etc. etc. etc. Too long to list them all.

This how the Ludovika Campus will look like

This is what the Ludovika Campus will look like

But there are other sacrosanct items worth mentioning: aid to art collections of churches, aid for the teaching of religion in schools, financial assistance to priests and ministers serving localities with populations of less than 5,000, financial support of priests and ministers serving abroad, aid for the Piarist order, aid to the Hungarian Reformed school in Debrecen, aid to religious organizations abroad, and finally financial aid for the organizations of ethnic minorities.

It is perhaps not surprising for those who are familiar with the Orbán government’s modus operandi that the largest amount is being taken away from the ministry that looks after healthcare, education, and culture. At the same time the government is spending billions and billions on at least three dozen stadiums all over the country. There is no question where this government’s priorities lie.