Hungarian Liberal party

Domestic reactions to Viktor Orbán’s “illiberal democracy”

In the wake of Viktor Orbán’s speech in Tusnádfürdő/Băile Tușnad on July 26 politicians on the left have been united in their condemnation while journalists on the right have been scrambling to make the speech more palatable.

The reactions of MSZP, DK, and Együtt-PM to the horrendous political message about establishing an “illiberal democracy” were fairly similar. They all deplored the fact that the Hungarian prime minister seems to be following the example of Putin’s Russia.

József Tóbiás, the newly elected chairman of MSZP, was perhaps the least forceful  in his condemnation of Viktor Orbán’s political philosophy. Tóbiás pointed out that Orbán with this speech demonstrated that he has turned against all those who don’t share his vision: the socialists, the liberals, and even the conservatives. Because all of these ideologies try to find political solutions within the framework of liberal democracy.

Együtt-PM found the speech appalling: “The former vice-president of Liberal International today buried the liberal state. Prime Minister Viktor Orbán not only lay to rest liberal democracy but democracy itself.” Subsequently, the party decided to turn to Brussels, asking the European Commission to protect the independent NGOs.

Gábor Fodor in the name of the Hungarian Liberal Party recalled Viktor Orbán’s liberal past and declared that “democracy is dead in our country.” The prime minister “made it expressly clear that it’s either him or us, freedom loving people.”

Szabolcs Kerék-Bárczy in the name of the Democratic Coalition (DK) was the most explicit. He said what many people have been hinting at for a while: that “a fascist state” is in the making in Hungary. “Unfortunately,” he added, Orbán “is either insane or a traitor, or both.”

LMP’s András Schiffer, as usual, had a different take on the speech. According to him, Orbán’s critique of liberal democracy is on target. Only his conclusions are wrong. LMP, which likes to describe itself as a green party, is an enemy of capitalism and also, it seems, of liberal democracy.

Magyar Nemzet published an interesting editorial by Csaba Lukács. He fairly faithfully summarized the main points of  the speech with one notable omission. There was no mention of “illiberal democracy.” And no mention of “democracy” either. Instead, he went on for almost two paragraphs about the notion of a work-based state and expressed his astonishment that liberals are so much against work. “Perhaps they don’t like to work and that’s why they panic.” Lukács clumsily tried to lead the discussion astray. Surely, he himself must know that the liberals are not worried about work but about the “illiberal democracy” he refused to mention in his article.

Journalists who normally support the government and defend all its actions seem to be at a loss in dealing with Viktor Orbán’s “illiberal democracy.” Deep down most likely they also know that this so-called “illiberal democracy” will not be democracy at all. So, they simply skirt the issue.

Válasz‘s editorial avoided the term as well, but at least István Dévényi wanted to know more about Viktor Orbán’s plans. After discussing the reactions of the opposition parties which talk about the end of democracy, he added: “I don’t think that for the time being there is reason to worry, but it would be good to know what exactly the prime minister has in mind when he talks about a nation-state, a work-based state that will follow the welfare state.”

A new English-language paper entitled Hungary Today managed to summarize the speech that lasted for 30 minutes in 212 words. Not surprisingly this Hungarian propaganda organ also kept the news of “illiberal democracy” a secret. Instead, the reader learns that “copying the west is provincialism, and we must leave it behind, as it could ‘kill us.'”

As for DK’s reference to Italian fascism, it is not a new claim. For a number of years here and there one could find references to the similarities between the ideas of Prime Minister Gyula Gömbös (1932-1936) and those of Benito Mussolini. As prime  minister of Hungary, Gömbös made great strides toward establishing a fascist state in Hungary. József Debreczeni, an astute critic of Viktor Orbán who uncannily predicted what will happen if and when Viktor Orbán becomes prime minister again, quipped at one point that comparing Orbán to Horthy is a mistake; the comparison with Gömbös is much more apt.

Népszava's headline: "He already speaks as a dictator / Getty Images

Népszava’s headline: “He already speaks like a dictator / Getty Images

Péter Új, editor-in-chief of 444.hu, rushed to the library to find a Hungarian-language collection of the Duce’s memorable speeches. I might add that the book was published in 1928 and that István Bethlen, who happened to be prime minister at the time, wrote the preface to Benito Mussolini gondolatai (The thoughts of Benito Mussolini). In this book Új found some real gems: “The century of democracy over.” Or, “Unlimited freedom … does not exist.” “Freedom is not a right but a duty.” “It would be suicidal to follow the ideology of liberalism … I declare myself to be anti-liberal.” “The nation of tomorrow will be the nation of workers.”

Others searched for additional sources of Orbán’s assorted thoughts and claims in the speech. I already mentioned Fareed Zakaria’s article on illiberal democracies. Gábor Filippov of Magyar Progressive Institute concentrated on Orbán’s assertion that a well-known American political scientist had described American liberalism as hotbed of corruption, sex, drugs, and crime. Filippov found an article by Joseph S. Nye, former dean of the John F. Kennedy School of Government at Harvard University, in the June 2004 issue of Foreign Affairs entitled “The Decline of America’s Soft Power.” (You may recall that Zakaria’s article also appeared in that periodical. It seems that one of Orbán’s speechwriters has a set of Foreign Affairs on hand!) But whoever wrote the speech badly misunderstood the text. The original English is as follows:

Autocratic regimes in the Middle East have eradicated their liberal opposition, and radical Islamists are in most cases the only dissenters left. They feed on anger toward corrupt regimes, opposition to U.S. policies, and popular fears of modernization. Liberal democracy, as they portray it, is full of corruption, sex, and violence—an impression reinforced by American movies and television and often exacerbated by the extreme statements of some especially virulent Christian preachers in the United States.

Radical Islamists are the ones who claim that liberal democracy is full of corruption, sex, and violence. Viktor Orbán is now joining their ranks. Putin, Mussolini, radical Islamists–these are Orbán’s ideological friends. And he has unfettered power to transform this frightening ideology into government policy.

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Banks versus the Hungarian government

Today was the last day for the legislators to get together before the summer recess. They marked the occasion by voting for a piece of legislation that is supposed to ease the hardship of those who took out loans in foreign currencies. Nobody seems to be satisfied with the result, with the exception of Hungary’s prime minister, Viktor Orbán, who announced that “this was a historic day that may be the start of a new era…. The era of fair banks may follow.” The debtors find the assistance insufficient. The banks consider it unfair and unconstitutional. And the Hungarian currency, the forint, has been ailing as more and more details of the proposed legislation have become known.

The loss the banks in Hungary face is at least $4 billion according to the estimates of Hungary’s central bank. Today OTP, Hungary’s largest lender, said it may have to refund borrowers $644 million, most of that sum due to the charge that banks were not transparent about unilateral changes to loan terms such as interest rate hikes and a smaller amount linked to exchange-rate margins. And this may not be the end of the banks’ troubles. Antal Rogán, whip of the Fidesz caucus, indicated that later in the year the government plans to force the banks to convert their forex loans to loans denominated in forints at a below-market exchange rate. That could cost the lending institutions an additional $16 billion.

The stock price of  OTP dropped as much as 4% during the course of the day, closing down 1.7% on the day and 4.1% on the week. The share price of Austrian Erste Group Bank AG, the second biggest lender in the country, plunged 16% after it was revealed that its loss in 2014 might be as large as 1.6 billion euros ($2.2 billion) because of its poor performance in Hungary and Romania.

London-based analysts see trouble ahead.  Peter Attard Montalto, an economist at Nomura International, thinks the market “is underestimating the disruptive impact the proposed path will have on the banks in the short to medium run.”

The forex loan legislation passed with an overwhelming majority. There was only one dissenting vote and two abstentions. The former came from Gábor Fodor, the sole MP of the Hungarian Liberal Party, and the two abstentions from DK members. Fodor argues that the legislation “will cause serious economic troubles.” He is also convinced that the Supreme Court’s (Kúria) decision regarding the currency bid/ask spread and the practice of unilateral changes in contracts is unconstitutional. In addition, there is the problem of the statute of limitations, which the bill retroactively changed in a bizarre way. The clock will start counting down only after the loan has been paid in full.

Naturally, the Banking Association (Bankszövetség) is up in arms. Taking advantage of the currency spread is an internationally accepted practice which covers the real cost to the banks. Like Fodor, the secretary of the association, Levente Kovács, considers the change in the statute of limitations unacceptable. He also objects to other retroactive changes incorporated into the legislation as “they violate the rule of law and cause uncertainty among investors.” He pointed out that the banking sector is one of the largest taxpayers in the country. The banks pay 220 billion forints yearly in taxes, and that does not include the extra tax levies they had to suffer in the last three years. The extra levies themselves amount to 1 trillion forints, which translates into 2 million forints per forex debtor. He predicted serious losses and, as a result, forced consolidation in the sector.

Everybody suspects that the banks will go to court over the issue of unilateral contract changes. It is also almost certain that there will be court battles over the legality of converting foreign currency loans into forint loans at below-market rates.

Swiss franc2

All this made no impression on Fidesz legislators. Antal Rogán claimed after the vote that parliament had at last meted out justice for the debtors and promised that within a few months all unfairly collected charges would be refunded. According to Rogán, the average debt holder may receive a refund of between 600,000 and 1 million forints before the end of the year.

This promised windfall did not satisfy those foreign exchange debt holders who had earlier organized several groups to battle for their “rights.” One of these groups, Otthonvédelmi Tanács (Council of Home Defense), demonstrated in front of the parliament building this afternoon. Figuring that an average loan is 7 million forints, they now demand 5.9 million back because in their estimation that 7 million forint debt has since doubled. They claim that the bill just passed will decrease their debt by only 1.2 million, which is not enough. They charged the banks with fraud, and some of the signs demanded jail sentences for bank managers.

Those who predicted court battles did not need to wait long. OTP shortly after the passing of the bill announced its decision to sue the government. And this is just the beginning.