Hungarian National Bank

The Hungarian scene: From economics to parochial schools

It is hard to pick just one topic to discuss today because too many important events have taken place lately.

The biggest bombshell yesterday was the final word on the Hungarian economy’s performance in 2012, which turned out to be worse than expected.  Hungary is still in recession, with the country’s GDP shrinking by another 1.7%. Hungary is the worst performing economy in the region and it doesn’t look as if there will be any change in the trend. After all, in the last quarter the economy performed even worse: the GDP decreased by 2.7% year on year.

The government blames the sluggish economy of the European Union and last year’s drought for the dismal numbers.  György Matolcsy naturally predicted that next year the Hungarian economy will be booming, and in his weekly essay for Heti Válasz he said that in twenty years Hungary will catch up to the living standards of the Scandinavian countries. He loves long term predictions, perhaps because he stumbles when trying to deal with the next few months. The brand new budget for 2013 will have to be readjusted because of the Hungarian government’s ill-advised purchase of E.ON. It is almost certain that new taxes will be levied either on businesses or on consumers in order to balance the books. And new taxes will put further pressure on growth. I may also add to that bad news another growth killer: the cost of agricultural products grew by 18.1%  in December year on year and by 15.4% during 2012. All in all,  Hungary has had the worst performing economy in the whole region in the last three years.

Yet Viktor Orbán goes on with his success stories. Every Friday morning we learn that all is in order. This time the story is that “five indicators in the Hungarian economy are all right; there is only one which is not and that is growth.” Naturally, receiving relatively high amounts of money per capita from the European Union is also a sign of Viktor Orbán’s political genius. As he repeats time and again, after Latvia Hungary received the most money per capita. But that is not something one ought to be proud of. It actually means that, after Latvia, Hungary is the country in which the economic problems are the greatest within the European Union.

It is hard to know when Fidesz supporters will realize that something is very wrong with the economic policy of the Orbán government. Even conservative economists, including Zsigmond Járai and László Csaba, are critical of György Matolcsy, and yet it doesn’t look as if Orbán is planning to get rid of him although naturally MSZP is demanding his resignation. At least Orbán announced this morning that he doesn’t plan any changes in his cabinet. But almost everybody is convinced that Matolcsy will be appointed the next governor of the Hungarian National Bank and that Mihály Varga, until now minister in charge of the nonexistent negotiations with the IMF, will replace him. Skeptics claim that nothing will change even if Varga takes over because the orders come from the prime minister, who seems to be an economic illiterate.

On the level of undersecretaries, on the other hand, there were changes in the last few days. Zoltán Balog decided to get rid of some people who were giving him headaches one way or the other. He dismissed László L. Simon, undersecretary for cultural affairs, admitting that he couldn’t work with the man. Rózsa Hoffmann was demoted, although my feeling is that Balog wouldn’t have minded parting with her. According to rumors Orbán saved Hoffmann’s skin, most likely not because of his personal feelings for this schoolmarm but because her dismissal would have created trouble between himself and his loyal supporters in the Christian Democratic parliamentary caucus. So, she relinquished all duties connected to higher education; she will be in charge only of elementary and high school education.

Orbán and Balog decided to pick István Klinghammer, former president of ELTE, to replace her because they were hoping that he would, because of his experience with university students, be able to find the right tone in negotiating with the rebellious students. However, I very much doubt that Klinghammer’s dictatorial style and his apparent disdain of the students will endear him to this bright young crowd. Because of his age (72) he spent almost his whole life in the Rákosi and the Kádár regimes, and his educational philosophy seems to reflect those days when Hungarian universities were no more than extensions of high schools. Hoffmann is seven years younger than Klinghammer, but she is also of that generation. These people reject anything considered to be progressive educational thinking. Klinghammer thinks that there are far too many young people going to the university and that they study Mickey Mouse subjects. He was against the Bologna system (B.A., M.A., Ph.D. sequence) and I’d bet that, if he could, he would return Hungarian higher education to those good old days when, in his and Hoffmann’s opinion, Hungarian education was the best in the world.

And while we are on the subject of education and Zoltán Balog’s ministry, let me touch on something that made my blood boil this morning when I read the report about what happened in an elementary school in Balatonfüred that had been taken over by the Hungarian Reformed Church. Let’s keep in mind that Zoltán Balog is a Hungarian Reformed minister. According to the article, two teachers were dismissed from the school because “they did not pray with sufficient devotion.” Mind you, the Hungarian Reformed Church promised at the time of the takeover of the school that there would be no discrimination on the basis of religious affiliation. Now, however, the Hungarian Reformed minister in Balatonfüred referred those who complained about the dismissal to §44 of the Hungarian Reformed Public Education Law that makes it a teacher’s duty to help the students become committed members of their church and country. In addition, the students should become believers. When the parents wanted to know what the two teachers had done wrong, they were told that “they behaved strangely.”

Devotion

Devotion

The officials of the Hungarian Reformed Church obviously lied when they promised religion-neutral education to all children. And the naive parents didn’t read the Hungarian Reformed Public Education Law. All this while the school is entirely financed by the Hungarian state. On all the taxpayers’ money, including the atheists’.

At least before the nationalization of schools in 1948 parochial schools were maintained by the churches and by tuition fees. Then it was crystal clear that in a parochial school there would be a large dose of religious indoctrination in addition to the compulsory subjects. In theory children of “other faiths” were left alone. They didn’t have to attend church services or the religious instruction offered in school. But in the school I had to attend out of necessity for two years the nuns made it quite clear that non-Catholics were simply tolerated and handled differently from the Catholics, who were in the great majority.

Churches certainly can have their own schools, but they should also finance them. Parents who think that their children would benefit from attending parochial school should pay for the privilege. And before parents are misled, as it seems the parents of this elementary school in Balatonfüred were, they should read all the paragraphs of the parochial schools’ public education laws. Very carefully. In this case, I’d bet a good number would change their minds.

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Another round of talks between Viktor Orbán and José Manuel Barroso

Viktor Orbán had a full schedule today: a lecture in Brussels and three important meetings with José Manuel Barroso, president of the European Commission; Herman Van Rompuy, president of the Council of Europe; and Martin Schulz, president of the European Parliament. A pretty exhausting schedule, especially since tomorrow the Hungarian prime minister is flying to Moscow to have a discussion with Vladimir Putin. The meeting will be brief, only half an hour, but the topics to be covered are weighty: setting natural gas prices for the next ten years and possible Russian involvement in the extension of the Paks Nuclear Plant.

In anticipation of the Orbán visit to Brussels, commentators differed in their assessment of what Viktor Orbán could expect in his negotiations. Some predicted difficult negotiations while others contended that after the two-year-long “freedom fight” it was time for Hungary to mend fences and normalize relations. Interestingly enough, Magyar Nemzet‘s commentator predicted a tough time, especially in light of the IMF-EU report released on January 28. The IMF officials predicted that in both 2013 and 2014 Hungary’s deficit will exceed 3%. If the European Commission takes the report seriously, their opinion might adversely influence Ecofin’s decision about lifting Hungary’s Excessive Deficit Procedure (EDP). And Viktor Orbán’s political future might depend on this decision. If the EDP is lifted, the Hungarian government could spend more freely in 2013 and early 2014 in anticipation of the election sometime in April of that year. Otherwise, further austerity measures must be introduced.

Viktor Orbán’s meeting with  Herman Van Rompuy was also more than a courtesy visit. As it stands, the European Union is planning to reduce the subsidies to Hungary by 30% over the next seven years. Considering that the little investment there is in the country comes from the EU convergence program, a 30% reduction could be devastating to the Hungarian economy.

Orbán began his Brussels schedule with a lecture at the Bruegel Institute, a European think tank specializing in economics. HVG somewhat sarcastically entitled its article about Orbán’s appearance at Bruegel “Orbán teaches economics to his audience in Brussels.” The very idea of Viktor Orbán giving a lecture on “work-based economies” to a group of economists working for this think tank borders on the ludicrous. I also wondered what his listeners thought when he boasted about his government’s achievements and called his economic policies a “true success story.”

The meeting between Barroso and Orbán took place in the afternoon and lasted a little longer than expected. At the subsequent joint press conference Barroso told the reporters that they talked about the upcoming EU summit in early February, about the 2014-2020 EU budget, and naturally the present state of the Hungarian economy. For the time being the Commission has no definite opinion about the past performance of the Hungarian economy, but by February 22 their recommendations to Ecofin will be ready. There was one sentence here that I think needs more clarification: “We also discussed the quality of the economic adjustments.” To me this means that Barroso and the Commission are aware that the way the Hungarian government achieved the low deficit may not be optimal.

Viktor Orbán and José Manuel Barroso at the press conference, January 30, 2013

Viktor Orbán and José Manuel Barroso at the press conference,
January 30, 2013

Viktor Orbán was more exuberant. “It was an excellent meeting,” he announced. They discussed matters that had created friction between the the Commission and Hungary in the past. He claimed that on the issue of the Hungarian National Bank they came to an agreement quickly. He admitted, though, that there are outstanding issues. Orbán indicated that he has no intention of backing down: the European Court of Justice will decide those issues he refuses to address himself. I might add here that cases the Commission sends to the Court usually go in the Commission’s favor.

Barroso sent a message to the Hungarians about the “rights and duties of the European Commission to insist that all national governments respect the laws of the Union.” The Commission tries to be impartial and objective. The Commission, like an umpire, must enforce the rules and regulations. This comment was most likely prompted by last year’s anti-European Union demonstrations instigated by the Orbán government.

Viktor Orbán might claim that the meeting was successful, but serious differences of opinion remain between the European Union and the Hungarian government over economic policies. The IMF-EU delegation predicted that further budget adjustments will be necessary to hold the deficit under 3%. Viktor Orbán disagrees, but I would be surprised if in the next few months, sometime before April, György Matolcsy didn’t announce another new tax in order to boost revenues.

All in all, at least on the surface, the meeting was friendly, or at least the two men pretended that it was. However, both Barroso and Orbán were careful in formulating their thoughts. In fact, Orbán opted to speak in Hungarian instead of his customary English, ostensibly because most of the reporters present were from Hungary. I suspect that the real reason was to avoid any imprecise formulation of his carefully worked out statement.

Whether Viktor Orbán was hoping for a public promise of support with regard to the Excessive Deficit Procedure I don’t know, but he didn’t get it. Olli Rehn, the commissioner in charge of finance, will have to mull over the details of the IMF report as well as the 2012 economic data submitted by the Hungarian Statistical Office. In my opinion, the 2013 budget belongs in a Brothers Grimm collection. The question is what the experts in Brussels will think of it.