Signs of internal divisions within the Hungarian governing party

In the last few months, as the popularity of Fidesz has been steadily declining, signs of serious internal divisions within the party have been proliferating. Ever since November one opinion poll after the other has reported serious losses in popularity for both Viktor Orbán and his party. Fidesz still leads, but the parties on the left are gaining ground. In fact, for the first time, the number of voters favoring all the democratic opposition parties combined is slightly higher than that favoring Fidesz.

It was almost inevitable that Fidesz’s political leadership would start looking for explanations for the waning popularity. Of course, the most obvious target should be Viktor Orbán himself. After all, Fidesz is a monolithic party where, according to grumbling party leaders, all decisions are made by the prime minister, who is also the head of the party.

His confidants nowadays are not the grand old men of Fidesz but upstarts like Antal Rogán, János Lázár, or the mysterious Árpád Habony who allegedly has no position either in the party or in the government yet is privy to the most confidential information if not state secrets. The old Fidesz leaders who joined the party twenty-five years ago either left a long time ago or Viktor Orbán set them aside. The less important characters had to be satisfied with positions inside state companies or insignificant administrative offices; the more important ones were either given positions that have clout on paper only, for example János Áder and László Kövér, or were shipped off to Brussels. Zoltán Pokorni, who at one point was chairman of Fidesz, had to be satisfied with a humble district mayoralty.

Until last November Fidesz spoke more or less with one voice, the voice of Viktor Orbán. If there were doubting Thomases, they became convinced by the cleverly orchestrated elections that, after all, “Viktor was right.” In fact, he is a political genius who can overcome all obstacles and lead the party to victory not just for the next four or eight years but for a very long time. Now, however, it looks as if Orbán has lost his touch. Instead of being able to correct his mistakes, he piles new ones on top of earlier ones. Moreover, several times in the last few months he had to retreat, which must have shaken the confidence of his closest associates.

I suspect that we are still not at a point that we will hear open criticism of Viktor Orbán himself. Instead, the criticism is directed against the men around him. The first public quarrel occurred in December when Zoltán Pokorni said a few disapproving words about the extravagant lifestyle of János Lázár. Kövér chimed in, taking Pokorni’s side. It is a well known fact that Kövér is no friend of Lázár, who runs the government’s daily business, serving as de facto prime minister, while Orbán himself acts like its all-mighty president, moving effortlessly on the stage of world politics. The quarrel didn’t end there. Lázár shot back and told Kövér that “a political veteran should think twice before he attacks us out of personal resentment or for political gain because he not only weakens us but also weakens or even executes himself.” I guess in this instance “execution” means the end of this veteran’s political career. This is not an idle threat. When after the lost 2006 election Orbán found out that some of his political friends at a party had discussed the desirability of replacing him because of his mistaken election strategy, they were promptly sent into political exile. The most prominent victim was János Áder. More recently, Tibor Navracsics, who as minister of justice criticized the legislative practices introduced by the prime minister’s office, soon enough found himself in Brussels.

In January we learned that József Szájer and János Kövér also have their disagreements, primarily over Hungary’s relations with the European Union. Szájer is an old timer all right. He was one of the founders of Fidesz but, as opposed to the provincial Kövér, is now serving his third five-year term as MEP in Brussels. In his case, Brussels is not a political exile. He is still a very close associate of Orbán. In fact, Szájer’s wife is perhaps the most important person in the Hungarian judicial system today. In any case, the two old friends from college don’t see eye to eye on the European Union. Kövér belongs to the right wing of Fidesz, a Euro-skeptic who ordered the removal of the EU flag from the parliament building and instead put up a newly-designed flag of the Szeklers living in Romania. About three weeks ago Kövér in an interview expressed his dislike of the European Union and said that it might not be a bad idea to think about leaving. Szájer openly expressed his dissatisfaction with Kövér’s ill-considered statement in an interview on ATV.

Then came another open disagreement, this time between László L. Simon, undersecretary of János Lázár in the prime minister’s office, and Gergely Gulyás, the right-hand of László Kövér and head of a parliament commission dealing with legislative matters, who talked about the likelihood of modifying the law on freedom of assembly. This announcement was unfortunate. It looked as if the Orbán government was planning to restrict the current law and was thereby intending to limit the kinds of demonstrations that took place recently on the streets of Budapest. L. Simon immediately announced that the idea was Gulyás’s private opinion. The government has no intention of revisiting the law on assembly. A very wise move on the part of the government.

Then about ten days ago Zoltán Illés, earlier undersecretary in the ministry of agriculture in charge of the environment, decided to go public with his criticism of the Orbán government’s nonexistent environmental policies. Illés is a committed environmentalist and was useful to Viktor Orbán when Fidesz was in opposition as he attacked the socialist-liberal governments for their neglect of environmental issues. Illés was everywhere a tree was cut down. He organized demonstrations and blocked several projects because of environmental considerations. In 2010 he most likely saw himself as the next minister of the environment and must have been taken back when the ministry was abolished and he became only an undersecretary in the ministry of agriculture. But, as he explained recently, he still hoped that even in this position he could be effective. That turned out not to be the case. His position was stripped of practically everything that used to belong to the minister of the environment. Between 2010 and 2014, while in office, the formerly vocal Illés was quiet as a mouse for example when hundreds of trees were cut out overnight around the parliament building. Eventually he no longer could stand it. He was the only Fidesz member of parliament to vote against building a new reactor at the Paks nuclear power plant. That sealed his fate. Not only is he no longer an undersecretary, he didn’t even receive a cushy job. Now he “tells all” everywhere he has the opportunity.

In the last few days there have apparently been open disagreements between Lajos Kósa and Antal Rogán on immigration; between Zoltán Balog and Károly Czibere, his undersecretary, on the segregation of Roma children; between Antal Rogán and László Trócsányi, minister of justice, on the necessity of new legislation in defense of religions.

Finally, newspapers reported yesterday that János Bencsik, a Fidesz member of parliament, published a long critique of his party and the government on his own website.

The parrots are starting to learn words of their own.

Billions diverted from Hungarian state coffers to natural gas broker

Thanks to Budapest Sentinel, we now have an English translation of an article published on the internet site 444.hu with the title “This is the way to make the most money in Hungary.” Earlier I wrote a post about MET Holding A.G., headquartered in Switzerland. It is partly owned by MOL, the Hungarian oil company, and partly by Hungarian individuals–people formerly employed by MOL and businessmen with close ties to Viktor Orbán. At the time there were a lot of questions about this very successful company, but since then 444.hu‘s journalists managed to ferret out details of MET’s business model. As a result of their work, we now know how the Orbán government manages to divert public money into private hands. We can be certain that this is not the only enterprise that specializes in creating a new business class on taxpayer money. Enjoy!

* * * 

President Vladimir Putin gives Prime Minister Viktor Orbán a knowing wink in January 2014

• MET has made huge profits on natural gas since 2011
• For this it needed the help of the government and state-owned MVM (Hungarian Electric Works)
• Russians are also involved
• Even as MET makes a lot of money, its business partner MVM requires state support

Over the past four years a Swiss-based company partially owned by various off-shore companies was given the opportunity by Hungary to enrich its owners in a totally unique fashion.

The Hungarian subsidiary of MET managed to make a huge amount of money by securing an exceptional place on the domestic gas market thanks to government orders and wonderful contracts.  After tax profits in 2012 alone were nearly HUF 50 billion (USD 225 million).

The government was so generous that all three opposition parties (MSZP, Jobbik, and LMP) filed complaints of misappropriation, fraud, and money laundering.   The National Office for Investigations, however, found no crime and did not open an investigation on the basis of any of the complaints.   Over a year ago MSZP, and now LMP, formally requested the MET gas contracts from MVM.  The parties are awaiting a court decision.

The machination that opened the road

It is not clear whether the elimination of the KÁT (obligatory electricity purchasing system) played a role in MET’s success, or whether one followed from the other, but the story starts here.

The KÁT was a unique kind of state support available in the case of renewable technologies or power plants producing both electricity and heat.  Here the second pillar of KÁT is interesting, which numerous local governments have to thank for being able to obtain heat inexpensively for district heating.   The theory was that the so-called “connected production” producing both electricity and heat was environmentally friendly because it made more efficient use of energy.  In this way the gas-fired power plants also qualified for state support and could supply heat cheaper.

The price of KÁT was built into the cost of electricity.  But in 2011 after a long debate the part pertaining to power producers was eliminated.  There was a big scandal about it.  For example, it was on this matter that former state secretary for energy matters János Bencsik clashed with then Fidesz caucus leader  János Lázár who submitted the bill.  Lázár won the battle and from July 2011 producers of electricity and heat no longer received supports from KÁT, and therefore could no longer provide a discount to many dozens of cities.

It was for this reason that the government issued a decree providing cheap gas to the settlements and institutions that suffered.  585 million cubic meters of gas was released from Hungary’s strategic gas reserve for this.  In this way it was possible to avoid increasing the price of district heating to many dozens of cities.  However, it was necessary to replenish the gas.

We’re replenishing, we’re replenishing

Let’s first look at the replenishment of the gas taken from the strategic reserve because that was the biggest business.

For many years it has been possible to purchase gas less expensively in Western Europe than the gas coming from Russia on the basis of the contract concluded (with Gazprom) in 1995.  (Of course, the gas coming from Western Europe may also have originated in Siberia, it is merely a matter of Russian pricing).

In the hope of obtaining cheaper western gas, the government issued a degree whereby the HAG pipeline between Hungary and Austria could be used free of charge in the interest of replenishing gas reserves.  Under normal circumstances gas traders would compete with one another for the right to use the pipeline, with the one paying the most given the right to use it.  This is a EU requirement, by the way.

However, given the extraordinary need to replenish gas, this obligation was temporarily suspended.   In the name of energy security the government made it possible to access the HAG pipeline without auction for one year between July 2011 and July 2012.  The government was very generous.  Minister for National Development Mrs. László Németh’s pencil cut a thick line.  In the interest of replenishing the 585 million cubic meters of gas used to compensate KÁT victims, it ordered that 2.9 billion cubic meters of gas could be transported without auction, in other words, very cheaply.

Furthermore, the law providing special access was extended from year to year, always with reference to energy security.  The current arrangement is valid through the end of June 2015.

For the past four years it has been possible to import a total of 19.6 billion cubic meters without having to compete for the right to use the pipeline.  All of this in order to replenish 585 million cubic meters of gas.  As the discounted quantity of gas completely used up the pipeline’s free capacity, during this time others could not access the HAG pipeline.  In other words, beyond the fact that the government put someone in a very favorable position, it also removed all competitors from the road.

According to the decree originally two companies were entitled to import gas without auction: the gas trading company (MVMP) owned by state-owned MVM (Hungarian Electric Works), and a small amount by E.on.  The gas business unit of the latter was acquired by the state in 2013 and given over to MVM.  In this manner, since then MVM has been the only beneficiary of this arrangement.

Apart from the long-term contract concluded with the Russians, only the state could import gas cheaper.  However, somebody else also made money off of this.  To be more precise, somebody else primarily made money off of this.

How does MET come into the picture?

Profits arising from the sale of gas imported inexpensively by MVMP could have enriched its owner, the state.  Or it could have sold the gas cheaper to consumers, and in this way help decrease utility costs.  But it did neither.  The arising profits were collected by the Hungarian subsidiary of Swiss based MET Holding.

The model works as follows:

• One of MET’s subsidiaries, METI, bought cheap gas from the west
• It sold the gas at the Austrian-Hungarian border to MVMP
• MVMP imported the gas by availing itself of free access to the pipeline in accordance with the decree on energy security, extended annually
• On the same day MVMP sold the gas at minimal profit to MET
• MET was than free to sell the gas to Hungary for whatever it could

So in practice the state allowed a market player to use the pipeline.  This is indicated by the fact that, according to the contracts, only such cash traded hands as was necessary for MET to pay MVMP a small margin for transporting the gas over the border.   This was HUF 2.50 (USD 0.012) per cubic meter.  Gas purchased from MET was HUF 32 (USD 0.15) cheaper per cubic meter in 2012 than the gas arriving from Russia on the basis of the long-term contract.

A year ago, an unknown individual posted part of the contracts concluded between MVM and MET online, without which no one would have found out what is happening.

And what became of the gas taken from the storage tanks?

The whole matter started when the government released 585 million cubic meters of gas from strategic storage in order to help those for whom district heating became more expensive as a result of the decrease in KÁT. Except part of the gas went to MET.

The official reason for this was that no one else needed the cheap gas.  According to the explanation, by the time the government decree was issued obliging MVM to release the cheap gas, every district heating company and potential beneficiary had already contracted with the market for the gas quantity required for the year.  MVM then decided that if it could not sell directly to those consumers leaving it in the lurch, it would issue a tender to sell the cheap gas.

In September 2013 and February 2014 Hungarian Socialist Party MPs Tibor Kovács and István Józsa posed questions relating to Mrs. László Németh, then Minister for National Development.  From her answers it is possible to figure out what happened.

From the answer given by Mrs. Németh in September, it can be determined that of the 585 million cubic meters of gas, only 270.6 million cubic meters could be supplied indirectly to the beneficiaries.  In other words, half the gas inventory was given over to traders.

And from the answer she gave in February 2014, it turned out that the trader was MET.

All of this the government found to be appropriate considering that by ministerial decree MVMP had to take delivery of the reserve gas.  And if it did not find a customer it was only logical that it sell the remaining gas through public tender with the requirement that the trader sell the gas to the KÁT victims.

Too much money, too little money

In 2012 it was readily apparent who was making money on this.  Even as the gas trading unit of MVM closed the year with a loss of half a billion forints (USD 2.3 million),  MET’s owners were able to take HUF 55 billion (USD 205 million) worth of dividends out of the company.

For a long time MVM was one of the largest revenue generators for the state.  Furthermore, it always had a lot of cash on hand.  It was precisely for this reason that from the first decade of this century it routinely happened that if there was a problem, MVM helped with the budget.   The trick was frequently employed by which the state took a few billions out of MVM if it got into temporary trouble.

Next to the state’s loss, MVM’s losses were negligible.  But one of Mol’s subsidiaries, FGSZ also lost on this construction because for years it could not issue a tender to use the HAG pipeline.  Fortunately, Mol was the 40 percent owner of MET.  (Mol stands for Hungarian Oil Company. -ed.)

But who are the owners?

This is not possible to know with certainty.   Even MET Hungary Zrt. CEO Gergely Szabó wasn’t willing to reveal this information to Figyelő.

What is certain is that MET Holding AG was registered in Switzerland, which has numerous subsidiaries. 40 percent of the holding company is owned by Mol, 10 percent by a Swiss company by the name of MET ManCo AG, in which Benjámin Lakatos has an interest.  The 38 year-old Lakatos, who is also the director of MET Holding, previously worked for Mol and is considered to be a confident of Mol CEO Zsolt Hernádi.

50 percent of the company belongs to WISD Holding, which owns numerous miscellaneous companies via a complicated network of offshore companies.  (Hungarian investigative website) Átlátszó previously unearthed that, among the companies in which WISD has an ownership interest, are companies owned by István Garancsi and György Nagy.  Garancsi is the owner of the Videoton football team and a good friend of Prime Minister Viktor Orbán and Zsolt Hernádi.

In the domestic business world György Nagy is considered an ally of OTP president Sándor Csányi.   Garancsi and Nagy are owners of WISD through their respective Cypriot companies, Inather Ltd. and Westbay.

The third known owner of WISD is Small Valley Investments Ltd., which is registered in the British Virgin Islands.  According to our information the company is owned by Russians, and that altogether they own 20 percent of MET Holding.

The fourth owner of WISD is a Swiss company by the name of Deneb Algedi Invest AG which is also owned by Benjámin Lakatos.

Viktor Orbán comes up

In Autumn of this year a Swiss and a Roman paper published articles claiming that the reason Viktor Orbán traveled to Switzerland may have been to conduct MET business.  A number of Hungarian energy experts are of the opinion that the articles appearing in the foreign papers were a warning on the part of foreign secret services that they were watching the opaque energy deals of the Hungarian government with Russia.  The articles appeared in two relatively minor international papers that are not in the habit of breaking stories of world economic importance.

Even before the Swiss article appeared, there were a lot of rumors that MET was very important to the Prime Minister.  The theory was that the company is an important part of the new economic elite being organized around the Hungarian head of government.

The Russians were also needed

In 2007 Mol founded the company that grew into MET Holding, and which the oil company was the only owner at the beginning.  In 2004 Mol sold its gas unit, but with the establishment of MET retained the possibility of returning one day to the gas trade.

In 2009 a company registered in Belize (Normeston) bought half of MET, at which point the Russians acquired an interest.  Belize is a Central American company where the institution of “introduction shares” exists.  This means that those people receive the dividends who can personally show that the shares are physically with them.  It is not necessary for them to introduce themselves.  That Russians were behind the company was confirmed by Gergely Szabó, MET Hungary CEO to Figyelő.   The company needed the Russians in order to help obtain gas cheaply:  “We also hoped that through its owners MET could obtain gas advantageously”.   That Russians are involved in the company through Small Valley, I heard from person familiar with Mol matters.

As Szabó explained, the Russians can obtain gas inexpensively.  There are those who believe that they are the other leg to MET’s wonderful rise.

Anyway the Russians are willing to sell gas to a given country cheaper than what is provided by the official, long-term contract, and creates various trading companies for the purpose of conducting the business.

This is how the business works

The trade in gas is the most profitable business on this side of Europe because:

• Huge quantities of it are needed, and it is possible to sell it in huge amounts.  Even with small margins it is possible to make huge profits in a short period of time.
• Because it arrives through pipelines, it is easy to establish a monopoly situation with it: only those with access to the pipeline can also sell it.
• The market is influenced by state regulations.  Who obtains the favors of the authorities needn’t be afraid of competitors.
• It is almost impossible to obtain gas that is not Russia.  Whoever is on good terms with them shall be showered in gold.

In these parts nearly all the gas comes from Russia, where the state has a monopoly and where the huge company by the name of Gazprom is responsible for production, delivery, as well as trade.  The Russians like to agree on gas prices separately with countries in this region for long periods, whenever possible.  The last of the so-called long-term contracts concluded by Hungary in 1995 for twenty years expires this summer.  There is no agreement regarding its extension and for this reason there is a lot of movement in the Hungarian gas market these days.

The long-term contracts are always political decisions often determined over the course of negotiations between the Kremlin and the government of the other country.  Gazprom sells the same gas at prices that vary by as much as three-fold.  There were times when Gazprom sold gas to Bulgaria for USD 600 per cubic meter but only charged Belarusian USD 167. There really is not other product on the international market for which there really is no price.  Nobody knows how much it costs to produce gas in Russia, and the Russians sell to their customers based on whatever momentary political interests dictate.

The buyers have little choice in the matter.  For example, in Hungary most households heat with gas, and much of the electricity is produced from gas, which is indispensable for industry.  So gas is required.  And it is difficult to choose among suppliers.   Oil prices exist because it is possible to change sources of supply:  oil comes in a barrel and in containers from just about anywhere.  For this reason oil prices are, for the most part, uniform.  A seller cannot allow himself to play with prices.  However, this is not the case with the delivery of gas, which is tied to pipelines.

There is also a cheaper one

So the gas enters the country on the basis of a price structure contained in the 1995 agreement.  But if the Russians want, they supply the same gas for less.

The Russians anyway created a shadow model as well.  In certain cases, seemingly harmful to their own market, they also sell gas cheaply to certain beneficiaries.  The way the model works is that they set up a trading company that is allowed to purchase gas from Gazprom at a reduced price, and then sell it to the target market for less than what is provided for by the long-term contract, but still with a respectable profit.

The Russians operate such brokerage companies for two reasons: on the one hand it enables them to sideline those among their own people the Kremlin happens to target.

On the other hand, it enables them to create and control the oligarchs and politicians of the target country.  Operating such a brokerage company is not only a good investment from the point of view of bribing oligarchs in the target country.  In general, through these companies it is also able to blackmail the target country even if its partners lose their influence as a result of a domestic political change or domestic showdown.   If a country becomes addicted to cheap gas, then whoever is in power thinks twice before deciding whether to terminate the grey business with the Russians at the price of higher utility costs, or for the new people to take the warm seats of the oligarchs of the previous cycle.

In this manner it is possible to earn a lot of money without effectively doing any work.  The brokerage companies sell the same thing as their competitors from the same sources.  They simply are able to access it less expensively.  Apart from paper work there is no other task.

There is some indication that MET partially works on the basis of this model.  There is no proof of this, but various domestic energy industry experts believe it is likely that the company can purchase Russian gas in Western European less expensively thanks to its Russian owners.

How does a more sophisticated model work?

The largest of such brokerage companies to ever exist was the Russian-Ukrainian RosUkrEnergo, which during its heyday in 2006 was able to make USD 785 million in profits in just under one year (this is about one half of the profits Austria’s ÖMV made in 2013).  Apart from this, neither refineries, nor petrol stations, nor anything else had to be maintained.  All that was required was the work of some lawyers in Switzerland.   RosUkrEnergo bought gas at a discount on the Russian side of the Russian-Ukrainian border, and then sold it on the other side.  Naturally, nothing happened to the gas itself.  The transaction only took place on paper.  Half of the company belonged to Ukraine Oligarch Dmitrij Firtas, the other half belonged to a Swiss subsidiary of Gazprom.

Reuters estimates that Gazprom lost USD 2 billion in under a few years by selling gas cheap to Firtas.  Except Firta was one of the most influential people in Ukraine for a long time.  More than half of the members of parliament literally took instructions for him, and in this way it was possible to manipulate Ukrainian politics to suit Russia’s needs.

For a while in 2009 Firtas was taken out of the business when Yulia Timoshenko became the Ukranian prime minister.  Then they took him back.  And then after (former Ukrainian president) Jankovics’ failure, he once again fell out of the picture.  He is presently under house arrest in Vienna, and most recently called attention to himself by announcing that Hungarian and Romanian paid assassins were threatening his life

However, the Hungarian connection does not only appear with Firtas.  He was the owner of a former Hungarian company by the name of Emfesz which, in its heyday, supplied Hungary with one-quarter of its gas, and which operated according to the same model: it gained a market for itself in Hungary with cheap gas from RosUkrEnergo.   In only a few years, Emfesz became the 27^th largest company in Hungary out of nothing.  This also shows the huge amount of easy money can be found in this business model.

Is MET the new Emfesz?

With the failure of Emfesz Hungary’s shadow model domestic player died out.  But it appears that a new company, MET, was able to step into its place, but just a little differently.   The Russians appeared as owners of MET in 2009.  That was the year when Firtas was pushed out of the gas trade, and with this Emfesz’ fate was sealed.

MET happened to become the large winner of the KÁT gas compensation in spring 2011 when Hungary and Russia opened a new chapter in relation to energy.  At that time the Hungarian government purchased a 21.4 percent interest in Mol from Russia’s Surgutneftegaz.  It is not possible to know who the owners of Surgutneftegaz are, but it is for certain that we are talking about companies that are close to the Kremlin.   This company, for example, supplies petrol to the Russian military.

At the time the purchase of the shares in Mol appeared to be a victory: using state administrative means the Russians were prevented from having a say in the running of MOL, and the government considered the business to be a national security success.  They claimed to have arranged for us not to be at the mercy of the Russians.  However, in retrospect it appears that the business may have been the start of a new Russian-Hungarian energy cooperation involving the political leadership of the two countries.   This is indicated by the fact that until that time Fidesz regarded Russia with suspicion.  However, since 2011 the friendship between the two governments has strengthened, and they are more and more cooperation agreements to show for it.

MET is expanding

These days MET is visibly strengthening, and it is readily apparent that the company’s ambition goes beyond simply bringing gas to Hungary.  Last year it purchased the Dunamenti Power station which produces electricity from gas and which is the country’s second largest producer of electricity.  The power plant almost went bankrupt before MET acquired it.  MET was able to save the power station by acquiring gas less expensively than the French.

In the same way, MET acquired GDP Suez Energy Holding Hungary Zrt. last year, which was the domestic electricity trader for the French company.

Offshore is not a problem

The Hungarian government officially opposes the spread of offshore companies to Hungary.  The new Fundamental Law officially opposes the spread of offshore companies in Hungary.  According to the new Fundamental Law the government of Hungary may not conduct business with companies whose ownership structure is not transparent.   Among MET’s owners are numerous offshore companies which, with powerful help from the state, are able to find fantastic opportunities in Hungary.

 

Public patience is coming to an end: What can Viktor Orbán do? Not much

Some of you want me to outline a scenario that could follow the unheard-of loss of popularity of the government, Fidesz, and Viktor Orbán personally. I am no fortune teller but, contrary to those readers who believe that the events of the last two months will have no adverse effect on the Orbán government in the long run, I see some signs that may lead to the eventual collapse of the system.

I base this admittedly hedged forecast (note the “some” and “may” in it) on data suggesting that Viktor Orbán has lost the trust of millions of his followers. I understand from news reports that Orbán and the Fidesz leadership by now have come to recognize the seriousness of the situation. Apparently they are preparing the ground to rebuild the prime minister’s tarnished reputation. The word is that he is planning to be more “active,” which in this context means that he will show his compassionate side. Today he visited an orphanage and held one of the little girls in his lap. The picture was shown all over, of course.

But I think the situation in which the prime minister finds himself won’t be fixed by a few smiles and friendly gestures toward his constituency. He has lost the people’s trust. And for that development he alone is to blame.

ATV showed a short video today on which a journalist confronts people on the street and tells some of Orbán’s latest fairy tales about the decrease in poverty, the increase in job opportunities, the excellent GDP figures, and the reduced utility prices. First of all, a few months ago when journalists tried to engage people on the street in conversation about political issues most people either refused to answer or the few who did usually praised the government and Orbán. Today’s video shows that people are no longer afraid to speak, and when they speak they don’t hide their opinions. The most frequently recurring answer was: Orbán is lying! What he says is not true. If that belief takes hold among the electorate, Orbán’s political future is in doubt.

There is another problem that, in my opinion, will prevent Orbán’s political comeback–and we know that without him there is no Fidesz either. The coffers are empty. No longer can the government appease the populace by throwing a few thousand forints their way, as they did when they lowered utility prices, an admittedly brilliant political stroke. Today they cannot give anything. On the contrary, they have to extract more and more money from the people in the form of taxes because otherwise they cannot keep the deficit under 3%. And if they overstep this magic figure, the excessive deficit procedure may be imposed, and this may mean the loss of subsidies from Brussels. It is obvious that they are desperate. They know that they should not irritate the already antagonistic voters with more and more taxes, but they seem to have no choice because they already spent the money on all sorts of superfluous projects, like stadiums, MOL shares, bank purchases, and so on. And then there is the corruption that has resulted in the loss to the public purse of billions in taxpayer money. Their past irresponsible (and worse) financial maneuvers may well be their undoing.

Another consideration is what I see as an erosion within Fidesz-KDNP. I already mentioned the revolt of KDNP’s chief Zsolt Semjén on the issue of a new law on the status of churches. He was joined a few hours later by Rózsa Hoffmann, who in the past was a faithful executor of Viktor Orbán’s ideas on education. Suddenly Hoffmann discovered that diverting children from gymnasiums is a very bad idea and that making employees of the Prime Minister’s Office work ten hours a day is not even legal. Or, there is the case of János Bencsik, a Fidesz member of parliament since 1998, who expressed his strong opposition to compulsory drug testing of children. As he put it, not even László Trócsányi, minister of justice, or Gergely Gulyás, the legal wizard of Fidesz, could make such a law constitutional. Even Gulyás thought that Máté Kocsis’s suggestion was “unorthodox” while “the world of the law is generally orthodox.”

The latest attempt at acquiring another 20 billion forints by making M0, a six-lane highway that more or less encircles Budapest, a toll road enraged not only commuters from nearby towns but also the Fidesz mayors whose districts would be affected by the decision. Again it was a last-minute ad hoc decision without any consultation. The mayors are not the only ones up in arms. Attila Chickán, minister of the economy in the first Orbán government, said that the decision will have a negative impact on the lifestyle of the people of Budapest.

Highway M0 will also be a toll road.
Are these people tired of governing?

And finally, young until now pro-Fidesz journalists have become disillusioned. Perhaps the best example I can cite is Ákos Balogh, editor-in-chief of Mandiner. I highly recommend his opinion piece that appeared today. The title is telling: “When ‘The Anything is Possible’ Ends.” Everything that worked in the past no longer works or, even worse, is counterproductive. In fact, Balogh goes so far as to state that the Orbán government, instead of remedying the “mistakes” of the last twenty years, itself became part of it. It did not finish the regime change as it promised but “it completed its failure.” Fidesz is good at campaigning but “sparkles less when it comes to governing.” Fidesz does not want to recognize that “something has changed,” and not only in foreign affairs as a result of the Ukrainian developments but also at home. Although “in theory” there will be no elections until 2018, “a government can be demobilized by broken public trust.” The lesson: “There is never such a thing as ‘Anything is Possible’ because there is always a fault line after which everything falls apart.” “The borders of  ‘Anything is Possible’ are not sharp, one can only conjecture about them. One can know only after the fact when someone has overstepped them. Perhaps he already has overstepped them.” Harsh words from a former true believer.